what is the manual of ideas?

“Very useful.”

—Murat Ozbaydar, Portfolio Manager,

Soros Fund Management

“Wonderful.”

—Tom Gayner, Chief Investment Officer,

Markel Corporation

“There is nothing else like it on the market.”

—Jake Rosser, Managing Partner,

Coho Capital Management

“Tremendous effort and well put together.”

—Mohnish Pabrai, Founder and Managing

Partner, Pabrai Investment Funds

Value-oriented Equity Investment Ideas for

Sophisticated Investors

“The best institutional-quality equity research.“

—Pavel Savor, Assistant Professor of Finance, The Wharton School

“An extremely valuable resource.”

—Guy Spier, CEO, Aquamarine Capital Management

“I highly recommend MOI — the thoroughness of the product coupled with the quality of the

content makes it an invaluable tool for the serious investor.”

—Tim Davis, Managing Director, Bluestem Asset Management

“We do similar work ourselves.”

—Glenn Greenberg, Founder, Brave Warrior Capital

Good ideas are the lifeblood of

the investment business and the

exclusive focus of The Manual of

Ideas. Authored by investment

professionals, who have grown up on

the teachings of Graham, Buffett and

Greenblatt, and have studied under

or worked with luminaries such

as Yale Chief Investment Officer

David Swensen and Economics

Nobel Laureate James Tobin, The

Manual of Ideas delivers timely,

differentiated investment ideas.

In a market flooded with data and

opinion, we deliver clarity.

The Manual of Ideas

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com January 21, 2010 – Page 9 of 124

BUSINESS OVERVIEW BreitBurn owns oil and natural gas reserves in the U.S.BreitBurn was formed as a master limited partnership (MLP) and went public in 2006. The majority of current reserves were acquired from Quicksilver Resources (KWK) in 2007.

INVESTMENT HIGHLIGHTS � Onshore U.S.-based oil and natural gas producer

with a total of 102 million boe * of proved reserves at year-end 2008. ** Natural gas represents 75% of proved reserves, which are mainly located in Michigan’s Antrim Shale (70% of proved reserves).

� 15+ years of reserve life based on proved reserves at yearend 2008 and 2008 production level. 92% of reserves are developed, meaning reserves can be recovered from existing wells with minor capex.

� Hedges provide cash flow visibility through 2013.89% and 85% of expected oil and gas production in 2010 is hedged at average prices of $81/bbl and $8/Mcf, respectively. Similar prices are hedged on volumes representing roughly 75%, 65% and 50% of production in 2011, 2012 and 2013, respectively.

� ~ 20% FCF yield on equity based on $168 million of net cash from operations (annualized from 3Q09)and $32 million of maintenance capex. Given existing hedges, relative stability of cash generation appears reasonable assumption for next four years. Management has started hedging into 2014 as well.

� Reinstatement of MLP distributions likely with continued FCF generation and reducing debt level. BreitBurn has reduced net debt by $160+ million since yearend 2008 to $574 million at 10/31/09, or 3.1x the midpoint of 2009 adj. EBITDA guidance.

� Borrowing base confirmed at $732 million inOctober 2009, with next evaluation in April. BreitBurn’s credit facility, which expires inNovember 2011, is provided by 18 banks.

� $13 EV to boe of proved reserves. This compares to an average realized sales price of $54 per boe and estimated all-in cash costs of $26 per boe in 3Q09.

INVESTMENT RISKS & CONCERNS � Lawsuit by 40% shareholder Quicksilver claims

BreitBurn “made false and misleading statements to induce Quicksilver to acquire units” in their 2007deal. Quicksilver recently dropped claims against individual BreitBurn directors but not the MLP.

* Barrels per oil equivalent (six thousand cubic feet to one barrel of oil).

SELECTED OPERATING DATA 1

FYE December 31 2006 2007 2008YTD

9/30/09� revenue 2 n/m -44% 970% -54%� production n/m 84% 126% -5%� realized price 3 n/m 1% 7% -13%� proved developed reserves n/m 351% -25% n/a� proved reserves n/m 363% -27% n/aProved developed reserves (period-end):Natural gas (Bcf) 4 457 434 n/aOil/liquids (Mbbls) 27,786 52,103 23,346 n/a

Total (Mboe)` 28,484 128,344 95,643 n/aAfter-tax NPV @ 10% ($mn) 4 312 1,912 592 n/aSelected average production data:Natural gas (MMcf) 273 4,134 22,384 15,826Oil/liquids (Mboe) 1,595 2,330 3,078 2,247

Total (Mboe) 1,640 3,019 6,809 4,885Realized average sales prices ($ per ...): 3

Natural gas (…Mcf) 4.90 7.36 8.24 7.45Oil/liquids (…boe) 55.98 58.93 71.51 65.08

Total (...boe) 55.24 55.69 59.49 53.96Selected expenses ($ per boe):Lease operating 5 17.66 19.60 20.55 20.16DD&A 5.19 9.75 26.42 16.66Revenue ($mn) 2 133 75 802 167Selected items as % of revenue:EBIT 38% -74% 54% -29%Net income 1% -80% 47% -41%DD&A 10% 39% 22% 49%Capex 29% 31% 16% 11%Net cash from operations ($mn) 46 60 227 184Tangible equity / assets (avg) 77% 73% 66% 59%��hares out (avg) n/m 48% 82% -16%

1 Where stated, 2006 data refers to owned assets at BreitBurn’s formation.2 Includes realized and unrealized gains/losses on derivative instruments.3 Includes realized gains/losses on derivative instruments.4 Based on SEC guidelines (from production of proved reserves with period-end prices held constant), and not accounting for hedges. 5 Excludes SG&A.

� Borrowing base at discretion of lenders, based on their valuation of reserves and internal criteria. Adecline in oil prices may reduce borrowing capacity.

MAJOR HOLDERS Insiders 1% | Quicksilver Resources 40% | Baupost 16% RATINGS VALUE Intrinsic value materially higher than market value? �� MANAGEMENT Capable and properly incentivized? �� FINANCIAL STRENGTH Solid balance sheet? ��MOAT Able to sustain high returns on invested capital? ��EARNINGS MOMENTUM Fundamentals improving? ��MACRO Poised to benefit from economic and secular trends? �� EXPLOSIVENESS 5%+ probability of 5x upside in one year? ��** Reserve total reflects sale of Permian assets. Reserves may be about 140 million boe at yearend 2009 based on new SEC average price rules.�

THE BOTTOM LINE What differentiates BreitBurn from other oil and gas producers is better visibility into future cash generation as a result of the company’s commodity price hedging program. As the hedges are struck at attractive prices, BreitBurn should be able to generate about $135 million of annual FCF through 2013/14. That amounts to close to 100% of market value over five years. At a minimum, the capacity to quickly de-lever significantly removes downside risk, while increasing the likelihood of a reinstatement of distributions, which traditionally represent one of the core benefits of the tax-efficient MLP structure. It appears unlikely that litigation will lead to any material value transfer from smaller shareholders to 40% shareholder Quicksilver. In fact, all shareholders may benefit from closer scrutiny of management to ensure intrinsic value is realized.

January 2010: Best Ideas for 2010

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com February 18, 2010 – 8 of 144

Exclusive Interview with Aaron Edelheit

We recently had the pleasure of interviewing Aaron Edelheit of Sabre Value Asset Management, a value-oriented investment firm founded in 1998. The firm manages the Sabre Value Fund and two distressed real estate funds. Edelheit graduated with a B.B.A. in finance from the University of Georgia in 1996. He is aphilanthropist and serves on the board of directors of the Moishe House Foundation. Edelheit maintains an online blog at aaronedelheit.com, which we have found educational and thought-provoking. Since June 1998, Edelheit has reported a compounded annual net return in excess of 12%.

The Manual of Ideas: Value investors come in many different stripes. How does your approach differ from some other value-oriented strategies?

Aaron Edelheit: I focus on small to medium sized companies that most investors have never heard of. My goal is to find companies that are very attractive, but aren’t being followed closely due to their size, lack of analyst coverage or neglect. I look for change inside of those companies that investors are not seeing and that will make the company much more valuable. Specifically, I’m looking for spin-offs, companies restructuring, turnarounds and special situations, such as a company with two divisions, in which the poordivision is masking the other division that is very attractive. And I take very concentrated positions, am patient and do not use leverage.

MOI: You have at times put in writing your thesis on your favorite ideas, both long and short. Let’s take a look at some of what you’ve written and extract lessons that may help us become better investors. In April 2009, when Sprott Resource (Toronto: SCP), an investment firm controlled by respected Canadian investor Eric Sprott, traded at C$2.65 per share, you wrote, “What if I told you there was a company out there that was predominantly sitting in cash, gold and silver bullion with no debt, whose tangible book value is approximately C$3.50 per share, with little expenses, that was selling for C$2.65 per share? Better yet, what if I told you that it is run by one of the best resource investors around, who has a proven record for making investors money and has increased book value from $1.50 to over $3.50 in two years?” Many investors reading your argument might have said, “Yes, I see that SCP is undervalued on a sum-of-the-parts basis, but what is the catalyst to unlocking value? Can’t the discount persist indefinitely?” Eight months later, SCP traded at more than C$4 per share, with additional upside looking likely due to value creation in the interim. When dealing with investment vehicles such as SCP, how do you decide what discount to net asset value is sufficiently compelling, and how do you avoid the entities that do trade at wide discounts to NAV for a long time?

Aaron EdelheitSabre Value

“I’m looking for spin-offs, companies restructuring, turnarounds and special

situations, such as a company with two divisions, in which the poor division is masking the other division that is very

attractive.”

February 2010: The Superinvestor Issue

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com March 25, 2010 – Page 84 of 116

Selected Brand Value Rankings Top 100 by Interbrand explanation of brand valuation methodology: http://bit.ly/99Jm6c

Interbrand Brand Finance Brand Ticker Country Sector Interbrand Brand FinanceCurrent Year Current Year of Origin Brand Value Brand Value

Rank Ago Rank Ago ($bn) y-y � ($bn) y-y �1 1 3 2 Coca-Cola KO United States Beverages 69 3% 35 6%2 2 4 3 IBM IBM United States Computer Services 60 2% 34 7%3 3 5 4 Microsoft MSFT United States Computer Software 57 -4% 34 9%4 4 6 6 GE GE United States Diversified 48 -10% 32 20%5 5 21 13 Nokia NOK Finland Consumer Electronics 35 -3% 20 -2%6 8 18 12 McDonald's MCD United States Restaurants 32 4% 20 1%7 10 2 5 Google GOOG United States Internet Services 32 25% 36 24%8 6 10 10 Toyota TM Japan Automotive 31 -8% 27 24%9 7 28 25 Intel INTC United States Computer Hardware 31 -2% 17 19%

10 9 19 18 Disney DIS United States Media 28 -3% 20 20%11 12 9 9 HP HPQ United States Computer Hardware 24 2% 27 15%12 11 39 52 Mercedes-Benz DAI Germany Automotive 24 -7% 14 41%13 14 117 94 Gillette PG United States Personal Care 23 4% 7 4%14 17 60 42 Cisco CSCO United States Computer Services 22 3% 11 6%15 13 29 26 BMW Frankfurt: BMW Germany Automotive 22 -7% 17 22%16 16 270 210 Louis Vuitton LVMUY France Luxury 21 -2% 3 5%17 18 149 128 Marlboro PM United States Tobacco 19 -11% 6 7%18 20 46 35 Honda HMC Japan Automotive 18 -7% 13 14%19 21 23 28 Samsung London: SMSN Republic of Korea Consumer Electronics 18 -1% 19 40%20 24 20 27 Apple AAPL United States Computer Hardware 15 12% 20 45%21 22 94 146 H&M Stockholm: H&M B Sweden Apparel 15 11% 8 81%22 15 50 50 American Express AXP United States Financial Services 15 -32% 13 28%23 26 31 21 Pepsi PEP United States Beverages 14 3% 16 6%24 23 49 39 Oracle ORCL United States Computer Software 14 -1% 13 15%25 28 198 63 Nescafé NSRGY Switzerland Beverages 13 2% 4 -52%26 29 33 22 Nike NKE United States Sporting Goods 13 4% 16 8%27 31 104 102 SAP SAP Germany Computer Software 12 -1% 8 24%28 35 - - IKEA Privately held Sweden Home Furnishings 12 10% - -29 25 52 34 Sony SNE Japan Consumer Electronics 12 -12% 13 9%30 33 16 19 Budweiser BUD United States Alcohol 12 3% 21 27%31 30 44 32 UPS UPS United States Transportation 12 -8% 13 11%32 27 8 7 HSBC HBC United Kingdom Financial Services 11 -20% 28 12%33 36 126 110 Canon CAJ Japan Computer Hardware 10 -4% 6 8%34 39 98 71 Kellogg's K United States Food 10 7% 8 2%35 32 75 67 Dell DELL United States Computer Hardware 10 -12% 10 19%36 19 36 54 Citi C United States Financial Services 10 -49% 14 46%37 37 57 69 JP Morgan JPM United States Financial Services 10 -11% 12 45%38 38 38 89 Goldman Sachs GS United States Financial Services 9 -10% 14 106%39 40 120 55 Nintendo NTDOY Japan Consumer Electronics 9 5% 7 -32%40 44 315 277 Thomson Reuters TRI Canada Media 8 1% 3 16%41 45 - - Gucci GUCG Italy Luxury 8 -1% - -42 43 93 117 Philips PHG Netherlands Diversified 8 -2% 8 49%43 58 42 79 Amazon.com AMZN United States Internet Services 8 22% 13 79%44 51 32 37 L'Oréal Paris: OR France Personal Care 8 3% 16 41%45 47 154 135 Accenture ACN United States Computer Services 8 -3% 6 11%46 46 166 171 eBay EBAY United States Internet Services 7 -8% 5 28%47 48 35 66 Siemens SI Germany Diversified 7 -8% 15 79%48 56 - - Heinz HNZ United States Food 7 9% - -49 49 51 53 Ford F United States Automotive 7 -11% 13 29%50 62 212 - Zara Madrid: ITX Spain Apparel 7 14% 4 -

March 2010: The Brand Value Issue

© 2008-2010 by BeyondProxy LLC. All rights reserved. SUBSCRIBE TODAY! www.manualofideas.com July 29, 2010 – Page 7 of 140

We found it difficult to select our Top 5 investment ideas this month, as several other companies in this report offer very interesting risk-reward tradeoffs. We have slotted those companies into our “Next 5 ideas with strong downside protection.”They are EchoStar (SATS; $19.50; MV $1.7 billion), Gravity (GRVY; $1.55; MV $43 million), Harvest Natural Resources (HNR; $8.45; MV $280 million), Penn Millers (PMIC; $12.10; MV $57 million), and Seahawk Drilling (HAWK; $10; MV $118 million). Set-top box and satellite company EchoStar trades at a material discount to tangible book value, with well over one-half of market value in net cash and investments; it has improving business performance and is run by one of the most accomplished entrepreneurs in the industry, Charlie Ergen, who owns one-half of the equity. Korean Internet gaming company Gravity trades for less than net cash, is profitable and cash generative and should release a long-awaited new game within the next six to twelve months. Oil and gas firm Harvest trades at a lowly price based

on proved reserves in Venezuela, a country that strikes fear into investors but appears unlikely to stand in the way of value creation for Harvest shareholders. Penn Millers is a leader in the attractive agribusiness insurance niche, yet trades at a material discount to tangible book value, owing to an ownership change quirk typical in demutualizations. Gulf of Mexico jackup driller Seahawk has seen demand for its drilling platforms decline along with natural gas prices, but the shares have slumped to a level that might be below the price shareholders could realize in a liquidation that would see the rigs sold for scrap steel.

Finally, we are happy to bring you an exclusive interview with top-performing small cap value fund manager Scott Barbee of the Aegis Value Fund (AVALX), a mutual fund that has handily outperformed the

Russell 2000 Value Index since the fund’s inception in 1998. Scott has been through two very tough periods for value investors while at the helm of Aegis — the tech stock “melt-up” in 1998-2000 and the market collapse of late 2008 and early 2009. His insights into surviving and thriving as a Graham-and-Dodd-style investor are perhaps not so much unique as they are a reminder that investors do better when they refuse to be swayed by the prevailing market psychology and instead follow their own path with discipline and conviction.

Sincerely,

John Mihaljevic, CFAand The Manual of Ideas research team

July 2010: The Downside Protection Issue

© 2008-2010 by BeyondProxy LLC. All rights reserved. SUBSCRIBE TODAY! www.manualofideas.com August 27, 2010 – Page 14 of 175

50+ Portfolios With Signal Value™ Revealing the Top Ideas of Top Investors

“Signal value” as opposed to “noise.” We present the

holdings of some of the world’s top investors. We look for

investors who have amassed impressive track records over

long periods of time. We choose these investors carefully

to avoid the noise inherent in most 13F-HR filings.

MOI Signal Rank answers the question, “What are

this investor’s top ten ideas right now?” Rather than

simply presenting each investor’s largest holdings as of the

recently filed quarter end, the MOI’s proprietary

methodology ranks the companies in each investor’s

portfolio based on the investor’s current level of conviction

in each holding, as judged by the MOI.

Our proprietary methodology takes into account a

number of variables, including the size of a position in an

investor’s portfolio, the size of a position relative to the

market value of the corresponding company, the most recent

quarterly change in the number of shares owned, and the

change in the stock price of a position since the most recent

quarterly filing date.

For example, an investor might have the most

conviction in a position that is only the tenth-largest

position in such investor’s portfolio. This might be the

case if an investor invests in a small company, resulting in

a holding that is simply too small to rank highly based on

size alone. On the other hand, such a holding might

represent 19.9% of the shares outstanding of the subject

company, suggesting a high level of conviction. Our

estimate of the conviction level would rise further if the

subject company has a 20% poison-pill threshold, thereby

suggesting that the investor has bought as much of the

subject company as is practically feasible.

Top investors included in this section:

� Bill Ackman, Pershing Square� Lee Ainsle, Maverick� Chuck Akre, Akre Capital� Zeke Ashton, Centaur Capital� Brian Bares, Bares Capital� Bruce Berkowitz, Fairholme� Richard Breeden, Breeden Capital� Tom Brown, Second Curve� Warren Buffett, Berkshire Hathaway� Francis Chou, Chou Associates� Chase Coleman, Tiger Global� James Crichton, Scout� Ian Cumming and Joe Steinberg, Leucadia� Boykin Curry, Eagle� David Einhorn, Greenlight� Phil Falcone, Harbinger� Alan Fournier, Pennant� Glenn Fuhrman and John Phelan, MSD Capital� Jeffrey Gates, Gates Capital� Tom Gayner, Markel Gayner� Kian Ghazi, Hawkshaw� Ed Gilhuly and Scott Stuart, Sageview� Glenn Greenberg, Brave Warrior� John Griffin, Blue Ridge� Howard Guberman, Gruss� Andreas Halvorsen, Viking Global� Mason Hawkins, Southeastern� Lance Helfert and Paul Orfalea, West Coast� Chris Hohn, Children’s Investment Fund� Carl Icahn, Icahn� Rehan Jaffer, H Partners� Seth Klarman, Baupost� John Kleinheinz, Kleinheinz Capital� Eddie Lampert, ESL Investments� Dan Loeb, Third Point� Steve Mandel, Lone Pine� Sandy Nairn, Edinburgh Partners� Mohnish Pabrai, Pabrai Funds� John Paulson, Paulson & Co.� Boone Pickens, BP Capital� Mark Rachesky, MHR� Lisa Rapuano, Lane Five� Larry Robbins, Glenview� Bob Rodriguez and Steven Romick, First Pacific� Wilbur Ross, WL Ross� Chris Shumway, Shumway Capital� David Tepper, Appaloosa� Peter Thiel, Clarium� Prem Watsa, Fairfax� Wally Weitz, Weitz Funds� David Winters, Wintergreen

August 2010: The Superinvestor Issue

© 2008-2010 by BeyondProxy LLC. All rights reserved. SUBSCRIBE TODAY! www.manualofideas.com September 30, 2010 – Page 16 of 141

Top 5 European Investment Ideas Lavendon (London: LVD)

Rental Equipment Leicestershire, UK, 44-1455558874 www.lavendongroup.com

Trading Data Consensus EPS Estimates ValuationPrice: £0.52 (as of 9/24/10) Month # of P/E FYE 12/31/09 n/a52-week range: £0.43 - £1.86 Latest Ago Ests P/E FYE 12/31/10 n/aMarket value: £86.7 million This quarter n/a n/a n/a P/E FYE 12/31/11 n/aEnterprise value: £254.4 billion Next quarter n/a n/a n/a P/E FYE 12/31/12 n/aShares out: 164.4 million FYE 12/31/10 n/a n/a n/a EV/ LTM revenue 1.2x

Ownership Data FYE 12/31/11 n/a n/a n/a EV/ LTM EBIT 21xInsider ownership: <1% FYE 12/30/12 n/a n/a n/a P / tangible book 1.0xInsider buys (last six months): >1 LT growth n/a n/a n/a Greenblatt CriteriaInsider sales (last six months): 0 EPS Surprise Actual Estimate LTM EBIT yield 5%Institutional ownership: n/a n/a n/a n/a LTM pre-tax ROC 4%

Operating Performance and Financial Position(£ millions, except Fiscal Years Ended LTME 6ME 6MEper share data) 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 6/30/10 6/30/09 6/30/10Revenue 108 100 125 186 260 227 219 114 106Gross profit 36 41 55 87 110 87 80 43 36Operating income (9) 7 13 26 39 (25) 12 (31) 6Net income (13) 1 7 15 17 (43) (7) (37) (0)Diluted EPS n/m 0.02 0.18 0.42 0.35 n/m n/m n/m n/mShares out (avg) 37 37 38 42 46 56 105 47 164Cash from ops 24 25 30 49 54 56 49 20 13Capex 2 8 36 50 59 13 16 5 8Free cash flow 22 17 (6) (1) (5) 43 33 15 5Cash & investments 8 8 10 17 15 76 6 10 6Total current assets 34 32 44 69 80 135 68 72 68Intangible assets 1 1 3 10 15 7 6 9 6Total assets 202 177 268 426 571 514 414 466 414Short-term debt 16 14 25 41 55 44 46 52 46Current liabilities 33 32 67 119 116 98 89 99 89Long-term debt 81 56 84 161 265 214 127 231 127Total liabilities 127 99 174 306 423 340 244 360 244Common equity 75 78 94 119 148 174 170 105 170

Ten-Year Stock Price Performance and Trading Volume Dynamics

0p

100p

200p

300p

400p

500p

600p

700p

800p

Sep 10Sep 09Sep 08Sep 07Sep 06Sep 05Sep 04Sep 03

September 2010: The European Value Issue

How do we do it? We have developed

a proprietary idea funnel that utilizes

quantitative and qualitative screening

techniques to focus our research team on

companies meeting various criteria for

potential outperformance. We also “comb”

through areas of the market ripe for investor

misperception and neglect. We then apply

an analytical framework grounded in deep

understanding of business economics,

competitive dynamics and security analysis.

Finally, we estimate the gap between market

price and intrinsic value and render a

judgment on the existence of catalysts to

closing such gap.

The result is a set of clear, concise and

actionable investment ideas designed

to help you outperform. Each month,

our research team brings you 20+

pre-qualified equity ideas, and selects the

3-5 stocks that are the most compelling

on the basis of value versus price. Our top

ideas exhibit a particularly large disparity

between price and value, giving you a large

margin of safety. The greater the latter, the

lower the risk of permanent loss and the

higher the likelihood of outperformance.

The following pages provide an overview of

the key features included in our reports.

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com April 21, 2010 – 8 of 120

MAXYGEN – BALANCE SHEET ANALYSIS

($ in millions, except as specified) 12/31/09 9/30/09 6/30/09 3/31/09 12/31/08 9/30/08 6/30/08 3/31/08

AssetsCash 126 153 154 146 155 172 80 78Short-term investments 34 50 49 55 52 41 42 55Accounts receivable 14 10 4 9 4 2 0 1Inventory - - - - - - - -Other current assets 2 2 1 1 1 1 2 2

Total current assets 176 214 207 211 211 216 124 137PP&E 2 2 2 2 2 3 3 3Goodwill and other intangibles - - - - - - - 12Long-term investments - - - - - - 0 0Other long-term assets - - - - - - - -

Total assets 177 216 210 213 214 218 127 152

Liabilities and Shareholders' EquityAccounts payable 1 6 1 2 1 2 3 4Short-term debt - - - - - - - -Other current liabilities 20 16 14 11 15 14 8 6

Total current liabilities 21 21 15 13 16 16 11 10Long-term debt - - - - - - - -Other long-term liabilities 4 5 2 3 3 4 - -

Total liabilities 26 26 17 16 19 20 11 10Preferred stock - - - - - - - -Shareholders' equity 152 190 193 198 195 198 116 142Shares out (avg) (mn) 39 38 38 38 37 37 37 37Selected Values and RatiosCash and investments 160 203 202 201 207 213 123 134Debt - - - - - - - -

Net cash and investments 160 203 202 201 207 213 123 134Current assets 176 214 207 211 211 216 124 137Current liabilities 21 21 15 13 16 16 11 10

Current ratio 8x 10x 14x 16x 13x 13x 11x 13x Acid-test ratio 8x 10x 14x 16x 13x 13x 11x 13x

Current assets 176 214 207 211 211 216 124 137Total liabilities and preferred 26 26 17 16 19 20 11 10

NET NET current assets 150 188 191 196 192 195 113 127Shareholders' equity 152 190 193 198 195 198 116 142Goodwill and other intangibles - - - - - - - 12

Tangible book value 152 190 193 198 195 198 116 130Tangible book to tangible assets 86% 88% 92% 93% 91% 91% 91% 93%Net debt to tangible equity <0% <0% <0% <0% <0% <0% <0% <0%Capital employed (3) (8) (8) (0) (9) (11) (6) (4)Balance Sheet Trends (sequential)� total assets� -18% 3% -2% 0% -2% 72% -16% n/a� shareholders' equity� -20% -1% -3% 2% -2% 71% -18% n/a� tangible shareholders' equity� -20% -1% -3% 2% -2% 71% -10% n/a� tangible book per share� -21% -2% -3% 0% -2% 70% -10% n/a� net cash and investments� -21% 0% 1% -3% -3% 74% -8% n/a� net net current assets� -20% -1% -3% 2% -2% 72% -11% n/a� accounts receivable� 48% 121% -53% 163% 94% 350% -64% n/a� inventory� n/m n/m n/m n/m n/m n/m n/m n/a� accounts payable� -79% 427% -39% 29% -36% -33% -18% n/a� capital employed� -58% 8% 1775% -96% -17% 70% 64% n/a

April 2010: Graham-Style Investing

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com May 24, 2010 – Page 9 of 118

Bruce Berkowitz, Fairholme Bruce Berkowitz, manager of The Fairholme Fund, has been one of the most successful value-oriented investors of the past decade. From inception on December 29, 1999 through December 31, 2009, The Fairholme Fund delivered a cumulative return, net of expenses, of 253%, versus a return of -9%, before expenses, for the S&P 500 Index. This translates into annualized performance of 13.4% and -0.9% for The Fairholme Fund and the S&P 500 Index, respectively.

MOI Signal Rank™ – Top Current Ideas of FairholmeMarket Price Shares Owned Holdings P/E (Est.) Price/Value Recent � from Recent � from as % of This Next Tang.

Company / Ticker ($mn) ($) Mar. 31 ('000) Dec. 31 Co. Fund* FY FY Book1 AIG / AIG 26,501 39.72 16% 25,468 new 4% 9% 12x 9x >9.9x2 RSC Holdings / RRR 878 8.49 7% 14,341 33% 14% 1% n/m 45x n/m3 Bank of America / BAC 163,938 16.34 -8% 39,310 new <1% 6% 16x 9x 1.7x4 Citigroup / C 115,340 3.98 -2% 227,461 6% <1% 8% 12x 9x 1.0x5 Winthrop Realty / FUR 260 12.29 2% 4,831 12% 23% <1% 16x 15x 1.3x6 Berkshire Hathaway / BRK.A 188,390 114,150 -6% 6 52% <1% 7% 20x 19x 1.9x7 Regions Financial / RF 9,850 8.26 5% 75,816 75% 6% 6% n/m 31x 1.3x8 Leucadia National / LUK 5,679 23.34 -6% 20,302 0% 8% 4% n/a n/a 1.3x9 Comcast / CMCSA 49,661 17.60 -7% 30,222 28% 1% 5% 14x 13x n/m10 St. Joe / JOE 2,737 29.53 -9% 26,799 0% 29% 7% n/m n/m 3.1x

Top Holdings of Fairholme – By Dollar ValueMarket Price Shares Owned Holdings P/E (Est.) Price/Value Recent � from Recent � from as % of This Next Tang.

Company / Ticker ($mn) ($) Mar. 31 ('000) Dec. 31 Co. Fund* FY FY Book1 Sears Holdings / SHLD 12,441 108.34 0% 14,714 -2% 13% 15% 39x 35x 2.8x2 AIG / AIG 26,501 39.72 16% 25,468 new 4% 9% 12x 9x >9.9x3 Citigroup / C 115,340 3.98 -2% 227,461 6% <1% 8% 12x 9x 1.0x4 St. Joe / JOE 2,737 29.53 -9% 26,799 0% 29% 7% n/m n/m 3.1x5 Humana / HUM 7,787 45.75 -2% 15,799 -1% 9% 7% 8x 9x 2.0x6 Berkshire Hathaway / BRK.A 188,390 114,150 -6% 6 52% <1% 7% 20x 19x 1.9x7 Hertz / HTZ 5,040 12.24 23% 56,179 -5% 14% 6% 27x 16x n/m8 Bank of America / BAC 163,938 16.34 -8% 39,310 new <1% 6% 16x 9x 1.7x9 Regions Financial / RF 9,850 8.26 5% 75,816 75% 6% 6% n/m 31x 1.3x10 AmeriCredit / ACF 2,955 21.96 -8% 28,204 -20% 21% 6% 17x 16x 1.3x

New Positions Sold Out PositionsAIG / AIGBank of America / BAC

Bristol Myers Squibb / BMYCoca-Cola / KOForest Labs / FRXMarshall & Ilsley / MIPenn West Energy / PWE

Pfizer / PFEUnited Rentals / URIWellPoint / WLPWhite Mountains / WTM

Portfolio Metrics * Sector Weightings *

Portfolio size $11 billion

Top 10 as % of portfolio 77%

Median market value $7.7 billion

Average market value $34 billion

Median P/E (this FY) 15x

Median P/E (next FY) 13x

Median P / tangible book 1.8x

* Based on equity holdings disclosed in 13F-HR filings with the SEC. Excludes portfolio cash, leverage, certain non-U.S. holdings, and non-equity securities.

Financial55%

Services36%

Capital Goods

5%

Other4%

May 2010: The Superinvestor Issue

© 2009-2010 by BeyondProxy LLC. All rights reserved. www.manualofideas.com June 30, 2010 – Page 104 of 120

Background on “Magic Formula” Investing

Magic Formula investing (MFI) is based on a simple yet powerful way of searching for undervalued stocks. According to Joel Greenblatt’s The Little Book That Beats The Market, portfolios of stocks selected quantitatively based on MFI criteria have handily outperformed the S&P 500 over the past couple of decades.

Magic Formula Performance vs. S&P 500, 1988-2004

CAGR, 1988-2004Magic Formula (all companies) 31%Magic Formula (largest 1000 companies) 23%S&P 500 12%Source: Joel Greenblatt, The Little Book That Beats the Market.

Magic Formula Performance vs. S&P 500, 1999-2009 *

(in %) ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08 ’09 avgMF 16 9 36 -21 52 28 22 13 15 -36 46 14.5S&P 15 -9 -12 -22 29 11 5 16 6 -37 19 -0.2* MF data represents performance of Formula Investing Model Portfolio,net of fees. 1999 data is from October 1, 1999 to December 31, 1999. 2009 data is through September 30, 2009. Average is 1999-2009 CAGR.Source: Formula Investing, www.formulainvesting.com

WHY WE LIKE MAGIC FORMULA INVESTING � Advocated by superinvestor Joel Greenblatt.

Greenblatt invented MFI as a do-it-yourself version of the approach he has espoused while amassing one of the most impressive investment track records of all time. While reliable data on Greenblatt’s complete track record is not available, some estimates put his annualized returns over the past couple of decades at well north of 20%. From 1985-1994, Greenblatt managed the Gotham Partners hedge fund, reporting annualized returns of 50% (after expenses, before performance fees). Gotham returned all outside capital in January 1995.

� Simple. The MFI screen ranks companies basedon only two variables: “cheapness” (pre-tax unlevered earnings yield) and “goodness” (return on capital employed). The two rankings are given equal weight in the final compilation of the MFI Top 100. This simple process stands in stark contrast to most quantitative screening methods, which rely on multiple variables and are difficult to replicate.

� Makes sense. Few investors would prefer a bad business to a good one, and few would purposely ignore the price they pay for a stock. MFI seeks out good companies that are available at good prices. The result is a list of businesses that offer both a high earnings yield and a relatively high probability that capital reinvested in the business will generate high returns. It makes intuitive sense that such stocks should outperform.

WHY MAGIC FORMULA CONTINUES TO WORK � “Institutional imperative” makes adherence

to MFI difficult. Institutional managers care not only about investment risk but, perhaps more acutely, about career risk. Many managers cannot afford to follow a winning strategy if it involves enduring long stretches of relative underperformance. It is much safer from a career standpoint to be “wrong” when everyone else is losing money than to be “wrong” when everyone is making money. During the 1988-2004 periodstudied by Greenblatt, MFI handily outperformed the S&P 500, yet the strategy experienced two non-overlapping three-year periods of underperformance. While most fund managers may be able to endure a quarter or a year of underperformance, they may be left with few investors after a two- or three-year period of subpar results. It is therefore extremely difficult to stick with MFI when the going gets tough.

� Investors have a hard time turning off their emotional biases. Even a quick peek at the list of candidates generated by the MFI screen –available at www.magicformulainvesting.com –is likely to make an investor’s stomach churn. Many companies on the list are either in out-of-favor industries or have major company-specific issues, such as regulatory scrutiny, accounting problems, executive turnover, or deteriorating operating momentum. While many investors may agree conceptually that buying good companies when they are out of favor is a path to long-term outperformance, a much smaller number would actually be willing to follow such a strategy. As a quantitative method, the MFI screen is perfectly sanguine about picking a headhunting firm during a recession or a laser eye surgery provider when the media is calling into question the safety of laser eye surgery.Professional investors legitimately want to use the MFI list as a starting point from which to do further research and ultimately make a subjective

June 2010: The “Magic Formula” Issue

Value-oriented Equity Investment Ideas for Sophisticated Investors

© 2008-2010 by BeyondProxy LLC. All rights reserved. SUBSCRIBE TODAY! www.manualofideas.com October 29, 2010 – Page 22 of 141

AGGREGATE INCOME DATA

($ in millions) H1 2010 H1 2009 % Change Q2 2010 Q2 2009 % ChangeTotal interest income 273,091 279,906 (2) 135,182 137,832 (2)Total interest expense 56,617 81,498 (31) 27,648 38,786 (29)

Net interest income 216,474 198,409 9 107,534 99,047 9Provision for loan and lease losses 91,145 128,197 (29) 40,303 67,370 (40)Total noninterest income 122,275 136,630 (11) 60,865 68,419 (11)Total noninterest expense 192,790 196,686 (2) 97,930 99,449 (2)Securities gains (losses) 3,737 839 346 2,148 (927) n/mApplicable income taxes 17,928 4,900 266 10,307 315 n/mExtraordinary gains, net (174) (3,655) n/m (232) (3,624) n/m

Total net income (includes minority interests) 40,449 2,440 n/m 21,775 (4,221) n/mBank net income 40,080 2,022 n/m 21,597 (4,376) n/m

Net charge-offs 100,747 86,723 16 48,959 49,173 (0)Cash dividends 17,317 13,374 30 12,934 6,139 111Retained earnings 22,763 (11,352) n/m 8,662 (10,515) n/m

Net operating income 37,904 5,682 567 20,487 (161) n/mSource: Federal Deposit Insurance Corporation, The Manual of Ideas.

Q2 2010, BY ASSET CONCENTRATION GROUP

Asset Concentration Groups *

Credit Inter- Agri- Com- Mort- Con-All Card national cultural mercial gage sumer

Banks Banks Banks Banks Lenders Lenders Lenders Number of institutions reporting 7,830 20 4 1,579 4,265 745 83Total assets ($ in billions) 13,221 719 3,059 189 4,358 795 97Total deposits ($ in billions) 9,141 272 1,981 155 3,323 530 81Bank net income ($ in millions) 21,597 2,582 7,737 489 2,271 1,287 304

Performance Ratios (annualized, %)Yield on earning assets 4.7 12.6 3.5 5.3 4.9 4.5 5.8 Cost of funding earning assets 1.0 1.4 .7 1.4 1.2 1.4 1.3

Net interest margin 3.8 11.2 2.7 4.0 3.8 3.1 4.5 Noninterest income to assets 1.8 2.9 2.2 .7 1.4 1.0 2.0 Noninterest expense to assets 3.0 4.1 2.8 2.7 3.1 2.1 2.7 Loan and lease loss provision to assets 1.2 6.4 .4 .5 1.3 .7 1.6 Net operating income to assets .6 1.3 .9 1.0 .2 .7 1.3 Pretax return on assets 1.0 2.2 1.4 1.2 .4 1.1 2.0 Return on assets .7 1.4 1.0 1.0 .2 .7 1.3 Return on equity 5.9 8.7 11.1 9.2 1.9 6.6 12.0 Net charge-offs to loans and leases 2.6 11.6 1.8 .7 2.0 1.1 2.2 Loan and lease loss provision to net charge-offs 82.3 64.9 68.5 114.1 99.5 102.8 93.4 Efficiency ratio 56.5 30.8 61.3 61.3 63.6 53.1 42.5

Structural ChangesNew Charters 0 0 0 0 0 0 0Banks absorbed in M&A 57 0 0 8 46 0 0Failed Institutions 45 0 0 1 42 0 0

Prior Second QuartersReturn on assets (%) 2009 (.1) (.7) (.5) .8 (.2) .6 .6

2007 1.2 3.3 1.0 1.3 1.2 .9 3.0 2005 1.3 3.2 .7 1.4 1.4 1.2 1.4

Net charge-offs to loans & leases (%) 2009 2.6 10.8 3.1 .6 2.1 1.3 2.8 2007 .5 3.9 .6 .2 .3 .3 1.9 2005 .4 4.2 .7 .2 .2 .1 1.1

* Excludes various “Other” categories. Credit-card lenders: institutions whose credit-card loans plus securitized receivables exceed 50% of total assets plus securitized receivables. International banks: banks with assets greater than $10 billion and more than 25% of total assets in foreign offices. Agricultural banks:banks whose agricultural production loans plus real estate loans secured by farmland exceed 25% of their total loans and leases. Commercial lenders: institutions whose commercial and industrial loans, plus real estate construction and development loans, plus loans secured by commercial real estate properties exceed 25%of total assets. Mortgage lenders: institutions whose residential mortgage loans, plus mortgage-backed securities, exceed 50% of total assets. Consumer lenders:institutions whose residential mortgage loans, plus credit-card loans, plus other loans to individuals, exceed 50% of total assets.Source: Federal Deposit Insurance Corporation, The Manual of Ideas.

Prima facie evidence of regulators’ intention to help existing banks rather than allow new entrants to benefit from Fed/FDIC policies

RoughlyFlat y-y

Declining provisions are helping boost reported income

Large variability in NIM, but everyone is doing okay

October 2010: Value Opportunities in Banks?Value-oriented Equity Investment Ideas for Sophisticated Investors

© 2008-2010 by BeyondProxy LLC. All rights reserved. SUBSCRIBE TODAY! www.manualofideas.com November 26, 2010 – Page 157 of 167

“Magic Formula,” based on Next Year’s EPS Estimates Companies with high returns on capital employed, trading at high earnings yields (based on next FY EPS estimates)

� �Move To Next FY EBIT/ Price to Insiders

Price 52-Week MV EV EV/ EPS Capital Tax Tangible % Buys/Company Ticker ($) Low High ($mn) ($mn) Sales Yield Employed Rate Book Own. Sells

1 ITT Educational ESI 61.92 -19% 97% 1,976 1,864 1.2x 18% 1547% 39% >9.9x 0% 3 / 12 GT Solar SOLR 7.21 -36% 39% 1,088 843 1.1x 17% infinite 37% 6.4x 0% 13 / 133 Bridgepoint Edu. BPI 15.31 -17% 80% 800 570 .9x 17% infinite 42% 4.0x 1% 7 / 74 Career Education CECO 19.46 -16% 84% 1,581 1,141 .5x 15% 14847% 34% 4.5x 0% 7 / 55 Apollo Group APOL 35.36 -2% 89% 5,226 4,526 .9x 13% 711% 46% 5.9x 4% 17 / 136 Metropolitan Health MDF 4.20 -56% 8% 170 129 .4x 13% 1422% 38% 3.1x 3% 8 / 37 Nephros NEP 6.94 -60% 67% 205 163 1.6x 18% 129% 23% 2.3x 0% - / -8 * Amedisys AMED 28.45 -20% 126% 826 891 .5x 12% 298% 39% >9.9x 1% 6 / 39 Lihua International LIWA 11.41 -36% 14% 333 242 .8x 16% 124% 25% 2.4x 0% - / -10 America's Car-Mart CRMT 25.26 -19% 19% 275 319 .9x 12% 218% 36% 1.5x 7% 3 / 211 Endo Pharma ENDP 35.63 -46% 7% 4,119 3,686 2.3x 12% 293% 25% 9.9x 0% 4 / 112 * Power-One PWER 8.99 -66% 45% 959 823 1.0x 14% 155% 42% 4.3x 2% 9 / 213 ePlus PLUS 23.89 -35% 9% 197 170 .2x 11% infinite 38% 1.1x 9% 11 / 614 Forest Labs FRX 32.48 -26% 5% 9,277 5,834 1.4x 13% 158% 29% 2.1x 1% 7 / 815 Kulicke and Soffa KLIC 6.19 -31% 55% 436 353 .5x 20% 96% n/m 1.7x 2% 9 / 1216 DeVry DV 44.53 -18% 67% 3,120 2,666 1.3x 11% 392% 33% 6.1x 10% 18 / 317 Microsoft MSFT 25.69 -12% 23% 219,791 186,283 2.8x 10% infinite 25% 6.6x 11% 14 / 1118 USA Mobility USMO 16.46 -40% 7% 363 221 .9x 11% 265% 31% 2.1x 1% 5 / 419 Dell DELL 13.90 -18% 26% 27,022 19,635 .3x 10% infinite 24% >9.9x 0% 12 / 820 Lincoln Educational LINC 15.19 -36% 86% 337 360 .6x 14% 110% 41% 3.1x 3% 4 / 721 Hewlett-Packard HPQ 42.49 -12% 29% 96,356 101,679 .8x 12% 143% 20% >9.9x 0% 4 / 422 Veeco Instruments VECO 42.45 -40% 28% 1,694 1,362 1.7x 12% 162% 4% 3.6x 1% 6 / 723 GameStop GME 20.12 -15% 29% 3,046 3,113 .3x 14% 97% 35% 4.0x 3% 4 / 524 China Electric Motor CELM 5.42 -23% 82% 119 83 .8x 22% 72% 27% 1.8x 2% 7 / -25 Gilead Sciences GILD 38.08 -17% 30% 30,916 32,060 4.0x 11% 192% 27% 7.5x 0% 7 / 426 Teradyne TER 11.86 -28% 13% 2,151 1,603 1.0x 11% 127% 7% 2.3x 0% 7 / -27 SinoCoking Coal SCOK 8.58 -59% 526% 179 207 2.9x 20% 70% 9% 2.4x 0% - / -28 * Mindspeed Tech MSPD 6.34 -44% 76% 204 174 1.0x 11% 137% 2% 3.9x 2% 11 / 1029 China Valves CVVT 8.93 -21% 66% 327 320 2.5x 17% 72% 21% 3.1x 0% - / -30 Kirkland's KIRK 10.79 -2% 135% 215 156 .4x 14% 80% 32% 2.1x 14% 9 / 231 Aeropostale ARO 26.14 -27% 23% 2,417 2,119 .9x 11% 137% 40% 4.9x 0% - / 232 Cephalon CEPH 64.68 -17% 13% 4,866 4,686 1.8x 13% 87% 28% >9.9x 1% - / 133 Corinthian Colleges COCO 4.75 -18% 307% 401 552 .3x 11% 115% 39% 3.4x 0% 7 / 334 Integrated Silicon ISSI 7.36 -45% 89% 193 106 .4x 16% 70% 3% 1.1x 0% - / 135 * QKL Stores QKLS 3.84 -5% 85% 114 55 .2x 11% 106% n/m 1.4x 0% - / -36 * D.R. Horton DHI 10.48 -10% 47% 3,342 4,204 1.0x 10% infinite n/m 1.3x 0% 2 / 237 Lam Research LRCX 46.51 -31% 5% 5,720 4,807 1.8x 11% 112% 16% 3.5x 0% 5 / 838 * Medicis Pharma MRX 27.19 -23% 14% 1,648 1,168 1.7x 9% infinite 41% 3.3x 0% - / -39 Gulf Resources GFRE 10.53 -40% 42% 365 291 1.9x 16% 67% 27% 2.0x 0% - / -40 PMC-Sierra PMCS 7.48 -8% 30% 1,731 1,554 2.5x 9% infinite 22% 3.5x 1% 16 / 841 * Cisco Systems CSCO 19.61 -1% 41% 109,521 85,874 2.1x 9% 3384% 18% 4.4x 0% 12 / 1242 * Amtech Systems ASYS 17.50 -67% 18% 161 105 .9x 12% 81% 39% 2.1x 2% 7 / 743 Exceed Company EDS 8.92 -31% 17% 175 100 .3x 24% 56% 6% .9x 0% - / -44 * Primoris Services PRIM 8.64 -35% 4% 413 403 .6x 11% 96% 39% 4.6x 40% 5 / 145 SanDisk SNDK 39.98 -52% 26% 9,375 8,159 1.7x 9% 338% 22% 1.8x 0% 12 / 6�� Company website SEC Y! Price Charts Proxy Y!

* New additions are highlighted. Screening criteria: ��V > $100 million ��Enterprise value to MV < 1.5

November 2010: The Superinvestor Issue


A Monthly Publication of BeyondProxy LLC � Subscribe at manualofideas.com

“If our efforts can further the goals of our members by giving them a discernible edge over other market participants, we have succeeded.”

Copyright Warning: It is a violation of federal copyright law to reproduce all or part of this publication for any purpose without the prior written consent of BeyondProxy LLC. Email [email protected] if you wish to have multiple copies sent to you. © 2008-2010 by BeyondProxy LLC. All rights reserved.

Investing In The Tradition of Graham, Buffett, Klarman

Year III, Volume XIDecember 27, 2010

When asked how he became sosuccessful, Buffett answered:“We read hundreds and hundreds of annual reports every year.”

Top Five Ideas In This Report

Compton Petroleum (Toronto: CMT, OTC: CMZPF) ….32

Corinthian Colleges (Nasdaq: COCO) ………………… 36

Global Cash Access (NYSE: GCA) …………………….. 52

Penson Worldwide (Nasdaq: PNSN) …………………. 64

Winn-Dixie Stores (Nasdaq: WINN) …………………. 80

Also Inside

Editorial Commentary ………………. 4

Superinvestor Update ………………. 8

Vitaliy Katsenelson Interview ……… 9

Stock Price Losers of 2010 …………14

Micro-Cap Underperformers ……….19

Favorite Value Screens ……………. 88

This Month’s Top Web Links ……… 98

About The Manual of Ideas

Our goal is to bring you investment ideas that are compelling on the basis of value versus price. In our quest for value, we analyze the top holdings of top fund managers. We also use a proprietary methodology to identify stocks that are not widely followed by institutional investors.Our research team has extensive experience in industry and securityanalysis, equity valuation, and investment management. We bring a “buy side” mindset to the idea generation process, cutting across industries and market capitalization ranges in our search for compellingequity investment opportunities.

HOLIDAY ISSUE

2010 LOSERS, 2011 WINNERS?

� Drilling down on the stock price losers of 2010� 17 companies profiled by MOI research team

� Proprietary selection of Top 5 candidates for investment� Plus: Superinvestor holdings update

� Plus: Favorite stock screens for value investors� Plus: Exclusive interview with Vitaliy Katsenelson

Companies mentioned in this issue includeAegean Marine Petrol, AgFeed Industries, Agilysys, Allied Irish Banks,

Alphatec, Amedisys, American Apparel, American Caresource, American Dairy, Apollo Group, A-Power Energy, Arena Pharma,

Aviat Networks, Bank of Ireland, Barnes & Noble, BPZ Resources, Brooklyn Federal, Builders FirstSource, Cano Petroleum, Charming Shoppes,

Cincinnati Bell, Community Bankers, Compton Petroleum,Comstock Resources, Consolidated Water,

Corinthian Colleges, Cowen Group, Crimson Exploration, Cybex, Dean Foods, Diamond Offshore, Doral Financial, Energy Conversion,

Farmers Capital, First BanCorp, Flagstar Bancorp, FreeSeas, FuelCell Energy, General Maritime, Global Cash Access, GMX Resources, GSE Systems,

H&R Block, Hercules Offshore, Hutchinson Technology, Jackson Hewitt Tax, Majesco, National Bank of Greece, Navigant Consulting, Navios Maritime,

Net1 UEPS, NGAS Resources, OceanFreight, Omega Navigation, Orchids Paper, Penson Worldwide, Petroleo Brasileiro, PremierWest Bancorp,

PrimeEnergy, Princeton Review, QKL Stores, Quantum Fuel Systems, RELM Wireless, Revlon, Salem Communications, Santarus, Seanergy Maritime,

Sharps Compliance, SmartHeat, Sterling Construction, SUPERVALU,TORM A/S, Unisys, Vermillion, Willbros Group, Wilmington Trust,

Winn-Dixie Stores, Yadkin Valley Financial, YRC Worldwide, and more.

(analyzed companies are underlined)

* A FREE book is available to members who receive The Manual of Ideas in the mail each month.

Irish Banks,esource, Pharma,esources, rming Shoppes, oleum,

n, Cybex, Conversion,FuelCell Energy,SE Systems

HAPPY HOLIDAYS!

Request your FREE copy* of Katsenelson’s The Little Book of Sideways Markets

Email your wish to support@

manualofideas.com

December 2010: 2010 Losers, 2011 Winners?

1 Key company financials


Ensco (ESV) – Blue Ridge , Eagle , Greenlight , Icahn Energy: Oil Well Services & Equipment Dallas, TX, 214-397-3000 enscointernational.com

Trading Data Consensus EPS Estimates ValuationPrice: $41.51 (as of 8/20/10) Month # of P/E FYE 12/31/09 8x52-week range: $33.33 - $52.32 Latest Ago Ests P/E FYE 12/31/10 11xMarket value: $5.9 billion This quarter $0.90 $0.97 33 P/E FYE 12/31/11 10xEnterprise value: $5.0 billion Next quarter 0.80 0.88 31 P/E FYE 12/30/12 8xShares out: 143.0 million FYE 12/31/10 3.63 3.76 36 EV/ LTM revenue 2.8x

Ownership Data FYE 12/31/11 4.27 4.31 38 EV/ LTM EBIT 7xInsider ownership: <1% FYE 12/30/12 4.95 5.03 21 P / tangible book 1.1xInsider buys (last six months): 0 LT growth 7.7% 7.7% 3 Greenblatt CriteriaInsider sales (last six months): 7 EPS Surprise Actual Estimate LTM EBIT yield 14%Institutional ownership: 88% 7/21/10 $0.82 $0.81 LTM pre-tax ROC 15%

Operating Performance and Financial Position($ millions, except Fiscal Years Ended LTME FQE FQEper share data) 12/31/03 12/31/04 12/31/05 12/31/06 12/31/07 12/31/08 12/31/09 6/30/10 6/30/09 6/30/10Revenue 742 731 1,034 1,770 2,058 2,394 1,946 1,773 497 406Gross profit 322 324 580 1,205 1,414 1,642 1,220 999 326 199Operating income 180 157 395 989 1,177 1,401 951 706 264 125Net income 108 93 285 770 992 1,151 779 671 198 125Diluted EPS 0.69 0.62 1.77 4.85 6.54 8.13 5.52 4.21 1.55 0.81 Shares out (avg) 150 151 152 152 147 142 140 141 140 141Cash from operations 287 256 358 947 1,247 1,161 1,239 1,047 253 210Capex 186 305 477 528 519 772 861 729 285 169Free cash flow 102 (49) (119) 419 728 389 378 318 (33) 41Cash & investments 354 267 269 566 630 790 1,141 1,237 882 1,237 Total current assets 543 494 578 987 1,129 1,401 1,653 1,688 1,537 1,688 Intangible assets 343 341 336 336 336 336 336 336 336 336Total assets 3,183 3,322 3,618 4,334 4,969 5,830 6,747 6,921 6,349 6,921 Short-term debt 23 23 17 167 19 17 17 17 17 17Total current liabilities 187 216 231 385 504 428 485 416 455 416Long-term debt 550 527 475 309 291 274 257 249 266 249Total liabilities 1,102 1,140 1,078 1,118 1,217 1,153 1,248 1,153 1,228 1,153 Preferred stock 0 0 0 0 0 0 0 0 0 0Common equity 2,081 2,182 2,540 3,216 3,752 4,677 5,499 5,768 5,122 5,768 EBIT/capital employed 8% 7% 15% 33% 36% 38% 22% 15% n/m n/m


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See which funds are buyers or sellers

Get consensus estimates and relevant financial ratios

Get multi-year historical financials

2 Investment case one-pager


BUSINESS OVERVIEW Ensco provides offshore contract oil drilling services.

INVESTMENT HIGHLIGHTS • Owns second-largest fleet of shallow-water jack-

up rigs worldwide with 40 rigs at June 30. Ensco also owns eight ultra-deepwater semisubmersibles (four of which under construction) and one barge.

• Value of shallow-water business alone may exceed recent market value. The business, which generated $0.6 billion of trailing EBIT, hassignificant earning power (2008 EBIT: $1.4 billion).

• $3.1+ billion value of eight deepwater rigs at cost including four rigs under construction (only $1.0 billion of capex remains at 6/30). 1H10 annualizedEBIT of $280 million could more than double as thefour rigs enter service in 2H10 through 2012.

• $1.0 billion of net cash as of June 30. Excess cash allows for additional return of capital beyond the dividend increase in April (especially as Ensco’s bid for Scorpion Offshore is no longer proceeding).

• Normalized earning power minimally affected by GOM spill. Even if drilling restrictions continue,Ensco’s shallow water business, global ops, and ability to redeploy deepwater rigs give it flexibility.

• Downside protected given $1.0 billion of net cash, FCF generation, and market value roughly in line with tangible book. Ensco sold three jack-up rigs for $142 million (~50% above book value) in 1H10.

INVESTMENT RISKS & CONCERNS • Average dayrate decreased 20% y-y in 1H10,

including an 18% decline in 2Q10. Even so, rig utilization fell to 76% in 1H10 from 79% in 1H09. As rig demand is tied to oil prices, Ensco’s profitability could suffer further if oil prices decline.

• Dependent on contract wins, as backlog fell 26% to $2.6 billion at June 30. While this still represents ~1.5x of annual revenue, visibility remains limited.

• Industry rig supply/demand. Ensco is exposed to competitive pressure arising from rising rig supply.

COMPARABLE PUBLIC COMPANY ANALYSIS P / This Next

MV EV EV / Tang. FY FY($mn) ($mn) Rev. Book P/E P/E

RIG 16,270 24,810 2.3x 1.3x 7x 6xDO 8,210 8,930 2.6x 2.2x 8x 8xNE 8,060 7,730 2.3x 1.1x 7x 7xNBR 4,710 7,530 2.3x .9x 18x 11xPDE 4,050 4,920 3.5x .9x 15x 8xESV 5,940 4,970 2.8x 1.1x 11x 10x

SELECTED OPERATING DATA FYE December 31 2007 2008 2009 1H101

∆ revenue 18% 16% -19% -14%∆ average day rate 24% 9% 4% -20%∆ backlog 22% 4% -27% -26%Revenue ($bn) 2.1 2.4 1.9 0.8% of revenue by segment:Deepwater 4% 4% 13% 30%Shallow water – Asia Pacific 44% 44% 37% 30%Shallow water – Europe/Africa 33% 34% 29% 19%Shallow water – North/South America 20% 19% 20% 21%Revenue growth by segment:2Deepwater n/a 16% 201% 271%Shallow water – Asia Pacific n/a 15% -31% -26%Shallow water – Europe/Africa n/a 20% -29% -57%Shallow water – North/South America n/a 13% -12% -8%EBIT margin by segment:Deepwater 48% 52% 49% 56%Shallow water – Asia Pacific 62% 62% 53% 39%Shallow water – Europe/Africa 63% 64% 55% 24%Shallow water – North/South America 54% 55% 47% 41%Corporate -3% -2% -3% -5%

Total EBIT margin 57% 59% 49% 37%Rig utilization by segment:3Deepwater 97% 95% 85% 95%Shallow water – Asia Pacific 99% 95% 70% 72%Shallow water – Europe/Africa 93% 96% 77% 66%Shallow water – North/South America 77% 97% 67% 86%

Total rig utilization 91% 96% 72% 76%Average day rates by segment ($000s):4Deepwater 199 335 425 407Shallow water – Asia Pacific 131 153 143 117Shallow water – Europe/Africa 199 221 199 133Shallow water – North/South America 107 98 120 85

Total average day rate 143 155 162 135Selected items as % of revenue:Gross profit 69% 69% 63% 54%Net income 47% 48% 40% 32%D&A 9% 9% 12% 14%Capex 25% 32% 44% 40%Backlog ($bn) 3.9 4.0 3.0 2.6Return on tangible equity 31% 30% 16% 11%Tangible equity to assets 73% 77% 80% 81%∆ shares out (avg) -4% -3% -1% 0%

1 Based on continuing operations (excludes three rigs sold in March/April ‘10).2 2007 y-y revenue growth is not available due to different segment reporting.3 Derived by dividing days under contract by total days in the period.4 Derived by dividing contract drilling revenue by the number of contract days.

MAJOR HOLDERS Insiders <1% | FMR 11% | Axa 7% | Greenlight 5% | First Pacific 5% | Keybank 3% | JPM 3% | TPG-Axon 2%

RATINGS VALUE Intrinsic value materially higher than market value? DOWNSIDE PROTECTION Low risk of permanent loss? MANAGEMENT Capable and properly incentivized? FINANCIAL STRENGTH Solid balance sheet? MOAT Able to sustain high returns on invested capital? EARNINGS MOMENTUM Fundamentals improving? MACRO Poised to benefit from economic and secular trends?

THE BOTTOM LINE The BP/Transocean oil spill in April and resulting six-month drilling moratorium in the Gulf of Mexico caused material share price declines of contract drillers such as Ensco. This represents an opportunity as Ensco’s long-term earning power should remain unaffected. Trading near tangible book despite cash-generative operations and $1.0 billion of net cash, shares appear undervalued based on Ensco’s shallow-water business alone, without giving any value to its significant deepwater assets.





































































































Dig deeper with segmental analysis

Get the investment thesis in a few sentences

Cut through the noise with key value drivers and risks

3 Company operating drivers

AMERICAN EXPRESS – EARNINGS DRIVERS AND LINE ITEMS ($ in millions, unless stated otherwise)

2006 2007 2008 2009 2010 Selected Performance Drivers

A Basic cards in force - U.S. (mn) 37 41 42 38 38 B Basic cards in force - int'l (mn) 25 29 33 34 37C Basic cards in force - total (mn) 63 70 75 73 75 D Card billed business - U.S. $406,800 $459,300 $471,100 $423,700 $479,300 E Card billed business - int'l $154,700 $188,000 $212,200 $196,100 $234,000F Card billed business - total $561,500 $647,300 $683,300 $619,800 $713,300 G Avg fee per card ($) $32 $32 $34 $36 $38 H Avg other comm & fees / card ($) $36 $34 $31 $25 $27 I Avg discount rate (%) 2.57% 2.56% 2.55% 2.54% 2.55% J Travel sales - Global Corporate $18,500 $20,500 $21,000 $14,600 $17,500 K Travel sales - U.S. Consumer $2,400 $3,000 $3,113 $2,561 $3,116 L Travel sales - Int'l Consumer $922 $1,113 $1,267 $985 $1,126 M Travel fees - Global Corporate 8.1% 7.7% 7.8% 8.8% 8.2% N Travel fees - U.S. Consumer 8.4% 8.0% 8.2% 8.4% 8.2% O Travel fees - Int'l Consumer 8.7% 8.6% 8.1% 8.6% 8.0%

Income Statement (GAAP, ie, on-book basis; excluding non-recurring items)

Discount revenue $12,978 $14,596 $15,025 $13,389 $15,111 ~ F * I Fees charged to merchants with which AXP has entered into card acceptance agreements; may not equal F * I due to payments to third parties unrelated to merchant acceptance

Net card fees $1,994 $1,919 $2,150 $2,151 $2,102 ~ C * G

Fees are recognized over 12-month membership period; may not equal C * G due to deferred direct card acquisition costs and cancellation reserves

Travel commissions and fees $1,778 $1,926 $2,010 $1,594 $1,779

= J * M

+ K * N

+ L * O

Transaction or management fees for airline or other transactions; commissions on plane tickets, hotels and car rentals, paid by travel suppliers

Other commissions and fees $2,233 $2,417 $2,307 $1,778 $2,031 ~ C * H

Foreign exchange conversion fees and other card-related assessments

Securitization income, net $1,489 $1,507 $1,070 $400 $0

The adoption of new GAAP on January 1, 2010 resulted in accounting for both securitized and non-securitized loans in the financial statements.As a result, there is no securitization income in 2010.

Other revenue $1,689 $1,751 $2,157 $2,087 $1,927

Insurance premiums earned from cardmember travel, revenue from contracts with Global Network Services partners including royalties and signing fees, publishing revenue, and other revenue

Interest income, members $4,586 $6,351 $6,159 $4,468 $6,783 Assessed using average daily balance method for receivables owned

Interest income, other $1,147 $1,073 $1,042 $863 $509 Relates to performing fixed-income securities held by AmEx; accrued using effective interest method

Interest expense, members ($1,192) ($1,297) ($1,015) ($462) ($549) Interest incurred to fund cardmember lending

Interest expense, charge card ($1,548) ($2,684) ($2,540) ($1,745) ($1,874) Interest incurred to fund charge card product receivables and general corporate purposes

Net revenue $25,154 $27,559 $28,365 $24,523 $27,819

Marketing & member services $6,504 $7,817 $7,361 $6,467 $8,644 Costs of rewards programs and protection plans for cardmembers, and advertising costs

Human resources $5,040 $5,438 $6,090 $5,080 $5,566 Professional services $2,269 $2,280 $2,413 $2,408 $2,806 Occupancy and equipment $1,384 $1,436 $1,641 $1,619 $1,562 Communications $434 $461 $466 $414 $383

Other, net $1,358 $330 $1,015 $381 $687 Operating expenses, gains (losses) on sale of assets not classified as discontinued ops, and litigation and insurance costs or settlements

Operating expenses $16,989 $17,762 $18,986 $16,369 $19,648 Provisions for losses

Charge card $935 $1,140 $1,363 $857 $595 Cardmember lending $1,623 $2,761 $4,231 $4,266 $1,527 Other $468 $202 $204 $190 $85 Total provisions $3,026 $4,103 $5,798 $5,313 $2,207 Pre-tax income $5,139 $5,694 $3,581 $2,841 $5,964 Income tax provision $1,528 $1,568 $710 $704 $1,907 Net income $3,611 $4,126 $2,871 $2,137 $4,057

Net income to common holders $3,611 $4,100 $2,856 $1,809 $4,006 2010 net income to common deducts share awards and other items from net income

Diluted EPS to common $2.92 $3.44 $2.47 $1.54 $3.35

Source: Company filings, The Manual of Ideas analysis.

Understand key operating drivers






Net card fees $1,994 $1,919 $2,150 $2,151 $2,102 ~ C * G



= J * M

+ K * N

+ L * O






Other revenue $1,689 $1,751 $2,157 $2,087 $1,927






Net revenue $25,154 $27,559 $28,365 $24,523 $27,819














Net card fees $1,994 $1,919 $2,150 $2,151 $2,102 ~ C * G



= J * M

+ K * N

+ L * O






Other revenue $1,689 $1,751 $2,157 $2,087 $1,927






Net revenue $25,154 $27,559 $28,365 $24,523 $27,819









Get detailed revenue and expense build-ups

See what’s behind each line item

4 Equity valuation analysis



…additional insight into KKR: OUR ESTIMATE OF THE EQUITY FAIR VALUE RANGE

($ in billions) Conservative Base Case Aggressive

Valuation methodology1 Sum-of-the-parts (see below for detailed assumptions)

Value of asset management business (100% economics):Value of management/monitoring fees:Fee-paying assets under management (AUM) as of 9/30/2010 $42.7 $42.7 $42.7 Estimated annual management/monitoring fees as a % of AUM 0.75% 1.00% 1.25%Implied annual revenue $0.3 $0.4 $0.5 Estimated normalized EBIT margin 30% 35% 40%Normalized EBIT $0.1 $0.1 $0.2 Fair value multiple (~90% of AUM contractually "locked-in" for 10-18 years) 10.0x 12.0x 14.0xEstimated value of management/monitoring fees (A) $1.0 $1.8 $3.0 Value of future carried interest:Estimated at-cost capital with carry rights (incl. unfunded commitments; excl. own funds) $39.3 $39.3 $39.3 Estimated annual gross rate of return 10% 15% 20%Implied dollar gain on which to apply carried interest (no hurdle rates in PE funds) $3.9 $5.9 $7.9 Carried interest percentage (generally 20%) 20% 20% 20%Implied gross carried interest 0.8 1.2 1.6Less carried interest allocated to KKR executives (typically 40%) (0.3) (0.5) (0.6)Net carried interest 0.5 0.7 0.9Fair value multiple 3.0x 4.0x 5.0xEstimated value of future carried interest (B) $1.4 $2.8 $4.7 Estimated value of asset management business (100%): (A) + (B) $2.4 $4.6 $7.7

Value of principal investing business (100% economics):Partners’ capital of principal activities segment (incl. capital markets portion) $4.5 $4.5 $4.5 Fair value multiple 1.00x 1.25x 1.50xEstimated value of principal investing business (100%) $4.5 $5.6 $6.8

Value of capital markets advisory business (100% economics):Estimated normalized annual fees ($mn; 3Q10 annualized transaction fees are ~$160 million) $150 $200 $300

Estimated normalized EBIT margin 50% 60% 70%Normalized EBIT ($mn) $75 $120 $210Fair value multiple 8.0x 10.0x 12.0xEstimated value of capital markets advisory business (100%) $0.6 $1.2 $2.5

Estimated total value of KKR activities (100%) $7.5 $11.4 $17.0 KKR & CO. L.P. % share of total economics 30% 30% 30%Estimated total value attributable to KKR & CO. L.P. (30%) $2.2 $3.4 $5.1 Less: KKR & Co. L.P. portion of consolidated net cash/(debt) (as of 9/30/2010)2 (0.1) (0.1) (0.1)

Estimated fair value of the equity of KKR & CO. L.P.3$2.1 billion $3.3 billion $4.9 billion$10 per unit $16 per unit $24 per unit

Selected implied ratios:Fair value of the equity to tangible book 1.9x 3.0x 4.5xEstimated value of mgmt fees and advisory business/1H10 annualized fee-related EBIT 5x 10x 18xEstimated value of future carried interest/1H10 annualized net carried interest 3x 6x 9x

1 Financials are based on total KKR figures including amounts attributable to the 70% economic interest held by KKR executives. As a result, our estimated value attributable to KKR & Co. L.P. adjusts for this in the lower part of the valuation table.2 Excludes restricted cash and cash held at consolidated entities. In addition, excludes cash within principal investing business as that is accounted for in the valuation of that segment.3 Based on 205 million units outstanding (excludes 4.2 million units from the exchange of KKR Holdings' units into KKR & Co. L.P. units in November 2010. Any exchanged units proportionally increase KKR & Co. L.P.'s interests in KKR economics).Source: Company filings, Manual of Ideas analysis, assumptions and estimates.


































































Benefit from logical valuation build-ups Get equity fair value

estimates based on different scenarios

Cross-check estimates with implied valuation ratios

5 “Superinvestor” holdings



Greenlight (David Einhorn) David Einhorn is the founder of Greenlight Capital, a value-oriented, research-driven investment firm with a market-beating long-term track record. From inception in May 1996 through yearend 2009, Greenlight Capital has returned, net of fees and expenses, 1,397% cumulatively or 22% annualized. He is also author of Fooling Some of the People All of the Time.

MOI Signal Rank™ – Top Current Ideas of Greenlight

Market Price Shares Owned Holdings P/E (Est.) Price/Value Recent ∆ from Recent ∆ from as % of This Next Tang.

Company / Ticker ($mn) ($) Sep. 30 ('000) Jun. 30 Co. Fund* FY FY Book1 Apple / AAPL 281,366 306.73 8% 838 >100% <1% 6% 16x 14x 6.0x2 CareFusion / CFN 5,239 23.50 -9% 13,375 53% 6% 7% 14x 13x 6.0x3 Ensco / ESV 7,120 49.79 11% 9,012 22% 6% 11% 14x 12x 1.3x4 BioFuel Energy / BIOF 62 1.91 -4% 7,542 0% 23% <1% n/a n/a 1.1x5 Pfizer / PFE 134,547 16.80 -2% 23,154 0% <1% 9% 8x 7x n/m6 CIT Group / CIT 8,320 41.55 2% 10,590 0% 5% 10% 16x 15x 1.0x7 Einstein Noah / BAGL 212 12.77 20% 10,733 0% 65% 3% 17x 15x >9.9x8 MI Developments / MIM 777 16.63 51% 5,655 0% 12% 2% n/a n/a .5x9 Broadridge Financial / BR 2,648 21.18 -7% 2,650 new 2% 1% 13x 12x >9.9x10 Aspen Insurance / AHL 2,251 29.35 -3% 4,140 0% 5% 3% 10x 8x .7x

Top Holdings of Greenlight – By Dollar Value


Company / Ticker ($mn) ($) Sep. 30 ('000) Jun. 30 Co. Fund* FY FY Book1 Ensco / ESV 7,120 49.79 11% 9,012 22% 6% 11% 14x 12x 1.3x2 CIT Group / CIT 8,320 41.55 2% 10,590 0% 5% 10% 16x 15x 1.0x3 Pfizer / PFE 134,547 16.80 -2% 23,154 0% <1% 9% 8x 7x n/m4 CareFusion / CFN 5,239 23.50 -9% 13,375 53% 6% 7% 14x 13x 6.0x5 Apple / AAPL 281,366 306.73 8% 838 >100% <1% 6% 16x 14x 6.0x6 Cardinal Health / CAH 12,632 36.20 10% 6,551 0% 2% 6% 14x 13x 5.4x7 Microsoft / MSFT 219,791 25.69 5% 7,660 0% <1% 5% 10x 10x 6.6x8 NCR / NCR 2,289 14.38 6% 11,469 0% 7% 4% 10x 9x 3.4x9 Xerox / XRX 16,203 11.68 13% 13,500 0% <1% 4% 13x 11x n/m10 Gold Miners ETF / GDX 7,605 59.30 6% 2,583 0% 2% 4% n/a n/a 1.0x

New Positions Sold Out PositionsBroadridge Financial / BRIngram Micro / IMVerigy / VRGY

EMC / EMCLockheed Martin / LMT


Portfolio size $4.2 billion








Financial27%

Health Care27%

Technology20%

Other26%





















Financial27%

Health Care27%

Technology20%

Other26%





















Financial27%

Health Care27%

Technology20%

Other26%

6 Proprietary “Signal Rank” methodology

• BillAckman,PershingSquare• LeeAinsle,Maverick• ChuckAkre,AkreCapital• ZekeAshton,CentaurCapital• BrianBares,BaresCapital• BruceBerkowitz,Fairholme• RichardBreeden,BreedenCapital• TomBrown,SecondCurve• WarrenBuffett,BerkshireHathaway• FrancisChou,ChouAssociates• ChaseColeman,TigerGlobal• NEWToddCombs,CastlePoint• JamesCrichton,Scout• IanCummingandJoeSteinberg,Leucadia• BoykinCurry,Eagle• DavidEinhorn,Greenlight• PhilFalcone,Harbinger• AlanFournier,Pennant• GlennFuhrmanandJohnPhelan,MSDCapital

• JeffreyGates,GatesCapital• TomGayner,MarkelGayner• KianGhazi,Hawkshaw• EdGilhulyandScottStuart,Sageview• GlennGreenberg,BraveWarrior• JohnGriffin,BlueRidge• HowardGuberman,Gruss• AndreasHalvorsen,VikingGlobal• MasonHawkins,Southeastern• LanceHelfertandPaulOrfalea,WestCoast• ChrisHohn,Children’sInvestmentFund• CarlIcahn,Icahn• RehanJaffer,HPartners• SethKlarman,Baupost• JohnKleinheinz,KleinheinzCapital• EddieLampert,ESLInvestments• NEWQuincyLee,TetonCapital• DanLoeb,ThirdPoint• SteveMandel,LonePine

• SandyNairn,EdinburghPartners

• MohnishPabrai,PabraiFunds

• JohnPaulson,Paulson&Co.

• BoonePickens,BPCapital

• MarkRachesky,MHR

• LisaRapuano,LaneFive

• LarryRobbins,Glenview

• BobRodriguezandStevenRomick,First

Pacific

• WilburRoss,WLRoss

• NEWKenShubinStein,Spencer

• ChrisShumway,ShumwayCapital

• DavidTepper,Appaloosa

• PeterThiel,Clarium

• PremWatsa,Fairfax

• WallyWeitz,WeitzFunds

• DavidWinters,Wintergreen

Includes funds who reveal holdings exclusively to usList of profiled “superinvestors”

A regular report feature is our quarterly

coverage of “superinvestor” portfolio

holdings based on 13F-HR filings of 50+

hedge fund and other investment managers

with superior long-term track records. By

following their moves, we complement our

other idea generation activities and ensure

that you don’t miss out on compelling

opportunities, even if they were not

originally sourced by us.

To assist our research team in prioritizing

our evaluation of companies owned by

superinvestors, we have developed Signal

RankTM. Signal Rank answers the question,

“What are this investor’s top ten ideas

right now?” Rather than simply presenting

each investor’s largest holdings as

of the recently filed quarter end, our

proprietary methodology ranks the

companies in each investor’s portfolio

based on the investor’s current level of

conviction in each holding, as judged by

The Manual of Ideas.

Signal Rank takes into account a number

of variables, including the size of a position

in an investor’s portfolio, the size of a

position relative to the market value of the

corresponding company, the most recent

quarterly change in the number of shares

owned, and the change in the stock price of

a position since the most recent quarterly

filing date.

7 Industry insights

© 2009 by BeyondProxy LLC. All rights reserved. www.manualofideas.com July 31, 2009 – Page 52 of 107

Do For-Profit Institutions Spend Too Little per Student? The following table appears to support assertions made by Jim Chanos in his presentation at the recent Ira Sohn conference. How might a pro-regulation Department of Education look at the comparison of per-student spending highlighted here? Per-Student Expenses of Postsecondary Institutions, 1999-00 through 2006-07

2006-07 Expenses ($millions)

Percentage Distribution of Total Expenses

Expenses per Student 1(in constant 2007–08 dollars)

1999–2000 2003–04 2005–06 2006–07 1999–2000 2003–04 2005–06 2006–07

Public institutions $238,829 — 100.0 100.0 100.0 — $25,246 $25,667 $26,062

Instruction 67,188 — 27.7 27.8 28.1 — 6,989 7,136 7,332 Research 23,894 — 10.4 10.2 10.0 — 2,636 2,612 2,607 Public service 10,148 — 4.4 4.3 4.2 — 1,106 1,104 1,107 Academic support 16,307 — 6.6 6.8 6.8 — 1,676 1,733 1,779 Student services 11,378 — 4.6 4.7 4.8 — 1,161 1,205 1,242 Institutional support 19,962 — 8.2 8.2 8.4 — 2,074 2,099 2,178 Operation and maintenance of plant 15,807 — 6.1 6.7 6.6 — 1,553 1,713 1,725

Depreciation 10,772 — 4.4 4.4 4.5 — 1,108 1,141 1,176 Scholarships/fellowships2 8,956 — 4.0 3.8 3.8 — 1,006 976 977 Auxiliary enterprises 18,502 — 7.7 7.6 7.7 — 1,934 1,962 2,019 Hospitals 22,111 — 9.0 9.1 9.3 — 2,274 2,344 2,413 Other opex 5,374 — 3.6 3.1 2.3 — 900 793 586 Non-operating expenses 8,430 — 3.3 3.3 3.5 — 831 848 920

Private not-for-profit 124,558 100.0 100.0 100.0 100.0 39,705 42,364 42,721 43,619

Instruction 41,223 32.3 32.5 32.9 33.1 12,812 13,771 14,067 14,436 Research 13,704 10.4 11.5 11.3 11.0 4,128 4,889 4,843 4,799 Public service 2,037 1.8 1.9 1.7 1.6 713 801 710 713 Academic support 10,882 8.1 8.4 8.7 8.7 3,207 3,557 3,736 3,811 Student services 9,591 7.1 7.2 7.7 7.7 2,802 3,064 3,279 3,359 Institutional support 16,831 13.1 13.4 13.4 13.5 5,214 5,666 5,730 5,894 Auxiliary enterprises 12,451 10.3 10.1 10.1 10.0 4,088 4,268 4,294 4,360 Net grant aid to students2 728 1.5 1.1 0.6 0.6 582 447 259 255 Hospitals 10,400 9.1 8.0 8.3 8.3 3,623 3,401 3,527 3,642 Independent operations 4,680 3.4 4.0 3.6 3.8 1,356 1,715 1,537 1,639 Other 2,029 3.0 1.9 1.7 1.6 1,180 785 739 710

Private for-profit 12,152 100.0 100.0 100.0 100.0 12,505 12,948 12,061 13,357

Instruction 2,884 30.5 25.6 25.3 23.7 3,810 3,312 3,056 3,170 Research and public service 6 0.6 0.1 0.1 0.1 80 15 10 7Student services and support 7,760 53.1 62.4 64.3 63.9 6,638 8,075 7,761 8,529 Auxiliary enterprises 333 3.8 3.4 2.7 2.7 469 439 327 366 Net grant aid to students 2 68 0.7 0.8 0.7 0.6 85 99 79 75Other 1,101 11.4 7.8 6.9 9.1 1,423 1,007 828 1,210

1 Enrollment of full-time students plus the full-time equivalent of the part-time students. 2 Excludes discounts and allowances. Note: Full-time-equivalent (FTE) enrollment includes full-time students plus the full-time equivalent of the part-time students. Source: U.S. Department of Education, National Center for Education Statistics, 1999–2000 through 2006–07 Integrated Postsecondary Education Data System, “Fall Enrollment Survey” (IPEDS-EF:99) and Spring 2001 through Spring 2008.



Banking Crisis: Where We Are, Where We Are Headed In this section, we present selected statistics on the state of the U.S. banking sector.

Summary Statistics on FDIC-Insured Banks QUARTERLY NET INCOME BANKS REPORTING EARNINGS GAINS

NET INTEREST MARGIN BY BANK SIZE NONCURRENT LOANS AND NET CHARGE-OFFS

12-MONTH CHANGES IN BANK LIABILITIES NUMBER OF FDIC-INSURED “PROBLEM” BANKS

Insights into the for-profit education industry (July 2009 report)

Analysis of the U.S. banking industry (October 2010 report)

In our quest for value, we routinely

scrutinize industries that have fallen out

of favor. Even when analyzing broader

industry trends, however, we do not lose

our focus on idea-generation. As such,

industry analysis serves to complement

company-specific ideas. Examples are

our recommendations on several U.S.

thrift conversions highlighted in our

October 2010 report on banks as well as

our negative views on several U.S.-listed

for-profit education companies featured

in our July 2009 issue.

8 Value-oriented stock screens

Each month, we present favorite stock

screens for value investors. These

include screens to uncover Ben Graham-

style “net-nets,” Joel Greenblatt’s

“magic formula” stocks and other value

candidates. Reports that fall outside our

quarterly “superinvestor” coverage may

focus on stocks pre-qualified through

these screens and our other, more

qualitative filtering processes. Many of

the investment ideas covered in these

reports include special situations such

as spinoffs and activist targets as well

as underfollowed companies (no analyst

coverage, small-and micro-cap stocks).

Based on our differentiated coverage, our

subscribers can usually point to several

winning ideas per year that they would

not have considered had it not been for

our work.



Activist Targets: Potential Sales, Liquidations or Recaps Companies that may unlock value through a corporate event

▼Move To Price to Next Insiders

Price 52-Week MV EV Tangible Net Cash NCAV EV/ FY % Buys/Company Ticker ($) Low High ($mn) ($mn) Book (% of MV) (% of MV) Sales P/E Own. Sells

1 Qiao Xing Mobile QXM 3.76 -45% 38% 198 (120) .5x 160% 199% n/m - 0% - / -2 Qiao Xing Universal XING 1.78 -24% 61% 164 (258) .3x 257% 198% n/m - 0% - / -3 Fuqi International FUQI 6.18 -27% 271% 171 46 .6x 73% 164% .1x 4x 0% - / -4 Volt Information VOL 6.50 -5% 108% 136 107 .5x 21% 147% .0x - 0% 1 / 15 Audiovox VOXX 6.58 -8% 48% 151 92 .6x 39% 140% .2x - 9% 10 / 106 * RINO International RINO 6.07 -6% 479% 174 139 .6x 20% 136% .6x 4x 0% 1 / -7 Crexus Investment CXS 12.61 -7% 15% 229 (46) .8x 120% 119% n/m 10x 0% 2 / -8 Opnext OPXT 1.37 -2% 101% 123 81 .6x 35% 117% .3x n/m 0% - / -9 Imation IMN 9.40 -15% 34% 364 107 .6x 71% 115% .1x 49x 0% 3 / -10 PennyMac Mortgage PMT 17.59 -12% 5% 296 (111) .9x 137% 110% n/m 7x 0% 1 / 111 Zoran ZRAN 6.96 -14% 77% 350 (22) .8x 106% 101% n/m n/m 1% 3 / -12 Colony Financial CLNY 19.15 -14% 10% 280 3 1.0x 99% 99% .1x 11x 0% 1 / -13 * Pebblebrook Hotel PEB 18.33 -8% 22% 731 28 1.1x 96% 95% 1.2x 68x 0% 1 / -14 Movado MOV 11.40 -24% 28% 282 237 .8x 16% 94% .6x 76x 0% 1 / 115 Ingram Micro IM 17.92 -18% 5% 2,810 2,408 .9x 14% 93% .1x 8x 0% 5 / 416 Sprott Physical Gold PHYS 11.88 -19% 8% 821 88 1.1x 89% 89% n/m - 0% - / -17 West Marine WMAR 9.22 -26% 48% 208 171 .9x 18% 88% .3x 10x 22% 8 / 418 PC Connection PCCC 7.96 -28% 12% 211 174 1.1x 18% 88% .1x 9x 2% 1 / 319 Exceed Company EDS 8.92 -31% 17% 175 100 .9x 43% 87% .3x 4x 0% - / -20 Cynosure CYNO 9.99 -12% 41% 126 36 1.0x 72% 83% .5x n/m 0% - / -21 Benchmark Electron. BHE 16.60 -16% 37% 1,011 676 1.0x 33% 83% .3x 11x 1% 2 / 222 QLT QLTI 5.94 -39% 12% 304 105 .8x 65% 82% 2.3x - 1% 3 / -23 Tech Data TECD 44.01 -21% 11% 2,051 1,530 1.1x 25% 81% .1x 10x 1% 10 / 1224 FormFactor FORM 9.45 -27% 140% 475 103 1.1x 78% 81% .6x n/m 0% 5 / 225 Nam Tai Electronics NTE 6.33 -36% 7% 284 65 .9x 77% 79% .1x 16x 0% - / -26 Tuesday Morning TUES 5.10 -59% 73% 219 219 .9x 0% 76% .3x - 2% 6 / 227 Maxygen MAXY 6.25 -18% 15% 188 35 1.3x 81% 76% .8x n/m 1% 4 / -28 Callaway Golf ELY 7.69 -25% 33% 495 384 .9x 22% 76% .4x 33x 0% 7 / 129 * InfoSpace INSP 7.71 -14% 58% 279 51 1.3x 82% 75% .2x 48x 3% 2 / 830 * Flexsteel Industries FLXS 16.82 -52% 1% 113 108 .9x 4% 75% .3x 8x 4% 6 / -31 * AMAG Pharma AMAG 13.85 -1% 279% 293 19 1.1x 94% 74% .3x n/m 0% 4 / 332 Cypress Bioscience CYPB 4.06 -49% 55% 157 51 1.3x 67% 73% 1.7x n/m 0% 1 / -33 Cogo Group COGO 7.71 -27% 6% 272 211 1.4x 22% 73% .6x 8x 0% - / -34 Ascent Media ASCMA 27.64 -20% 11% 395 116 .7x 71% 73% .3x n/m 0% - / -35 TomoTherapy TOMO 3.46 -25% 28% 187 47 1.1x 75% 72% .2x n/m 7% 14 / 536 Hurco HURC 19.72 -30% 2% 127 82 1.2x 36% 71% .9x 26x 0% 3 / -37 * Force Protection FRPT 5.13 -25% 32% 360 255 1.1x 29% 70% .3x 14x 0% - / -38 PCTEL PCTI 6.09 -21% 17% 113 48 1.1x 58% 70% .7x 23x 4% 5 / 539 * Rimage RIMG 15.80 -12% 16% 151 50 1.2x 67% 70% .6x 20x 0% 4 / 240 Hooker Furniture HOFT 11.11 -17% 62% 120 90 1.0x 25% 70% .4x 11x 1% 5 / -41 Alvarion ALVR 2.72 -35% 57% 169 76 1.2x 55% 70% .4x - 0% - / -42 Aviat Networks AVNW 4.27 -21% 93% 253 160 1.1x 37% 69% .3x 14x 2% 8 / 643 * Kimball KBALB 5.92 -19% 62% 223 170 .6x 24% 69% .1x - 2% 9 / 144 * Tollgrade TLGD 8.30 -31% 0% 106 37 1.4x 66% 68% .8x - 1% 7 / -45 * Integrated Silicon ISSI 7.36 -45% 89% 193 106 1.1x 45% 68% .4x 6x 0% - / 1 Company website SEC Y! Price Charts Proxy Y!

* New additions are highlighted. Criteria: ► Tang. book > 50% of MV ► ST assets - liabilities > 50% of MV ► Net cash ► MV > $100mn



Activist Targets: Potential Sales, Liquidations or Recaps Companies that may unlock value through a corporate event

▼Move To Price to Next Insiders

Price 52-Week MV EV Tangible Net Cash NCAV EV/ FY % Buys/Company Ticker ($) Low High ($mn) ($mn) Book (% of MV) (% of MV) Sales P/E Own. Sells

1 Qiao Xing Mobile QXM 3.76 -45% 38% 198 (120) .5x 160% 199% n/m - 0% - / -2 Qiao Xing Universal XING 1.78 -24% 61% 164 (258) .3x 257% 198% n/m - 0% - / -3 Fuqi International FUQI 6.18 -27% 271% 171 46 .6x 73% 164% .1x 4x 0% - / -4 Volt Information VOL 6.50 -5% 108% 136 107 .5x 21% 147% .0x - 0% 1 / 15 Audiovox VOXX 6.58 -8% 48% 151 92 .6x 39% 140% .2x - 9% 10 / 106 * RINO International RINO 6.07 -6% 479% 174 139 .6x 20% 136% .6x 4x 0% 1 / -7 Crexus Investment CXS 12.61 -7% 15% 229 (46) .8x 120% 119% n/m 10x 0% 2 / -8 Opnext OPXT 1.37 -2% 101% 123 81 .6x 35% 117% .3x n/m 0% - / -9 Imation IMN 9.40 -15% 34% 364 107 .6x 71% 115% .1x 49x 0% 3 / -10 PennyMac Mortgage PMT 17.59 -12% 5% 296 (111) .9x 137% 110% n/m 7x 0% 1 / 111 Zoran ZRAN 6.96 -14% 77% 350 (22) .8x 106% 101% n/m n/m 1% 3 / -12 Colony Financial CLNY 19.15 -14% 10% 280 3 1.0x 99% 99% .1x 11x 0% 1 / -13 * Pebblebrook Hotel PEB 18.33 -8% 22% 731 28 1.1x 96% 95% 1.2x 68x 0% 1 / -14 Movado MOV 11.40 -24% 28% 282 237 .8x 16% 94% .6x 76x 0% 1 / 115 Ingram Micro IM 17.92 -18% 5% 2,810 2,408 .9x 14% 93% .1x 8x 0% 5 / 416 Sprott Physical Gold PHYS 11.88 -19% 8% 821 88 1.1x 89% 89% n/m - 0% - / -17 West Marine WMAR 9.22 -26% 48% 208 171 .9x 18% 88% .3x 10x 22% 8 / 418 PC Connection PCCC 7.96 -28% 12% 211 174 1.1x 18% 88% .1x 9x 2% 1 / 319 Exceed Company EDS 8.92 -31% 17% 175 100 .9x 43% 87% .3x 4x 0% - / -20 Cynosure CYNO 9.99 -12% 41% 126 36 1.0x 72% 83% .5x n/m 0% - / -21 Benchmark Electron. BHE 16.60 -16% 37% 1,011 676 1.0x 33% 83% .3x 11x 1% 2 / 222 QLT QLTI 5.94 -39% 12% 304 105 .8x 65% 82% 2.3x - 1% 3 / -23 Tech Data TECD 44.01 -21% 11% 2,051 1,530 1.1x 25% 81% .1x 10x 1% 10 / 1224 FormFactor FORM 9.45 -27% 140% 475 103 1.1x 78% 81% .6x n/m 0% 5 / 225 Nam Tai Electronics NTE 6.33 -36% 7% 284 65 .9x 77% 79% .1x 16x 0% - / -26 Tuesday Morning TUES 5.10 -59% 73% 219 219 .9x 0% 76% .3x - 2% 6 / 227 Maxygen MAXY 6.25 -18% 15% 188 35 1.3x 81% 76% .8x n/m 1% 4 / -28 Callaway Golf ELY 7.69 -25% 33% 495 384 .9x 22% 76% .4x 33x 0% 7 / 129 * InfoSpace INSP 7.71 -14% 58% 279 51 1.3x 82% 75% .2x 48x 3% 2 / 830 * Flexsteel Industries FLXS 16.82 -52% 1% 113 108 .9x 4% 75% .3x 8x 4% 6 / -31 * AMAG Pharma AMAG 13.85 -1% 279% 293 19 1.1x 94% 74% .3x n/m 0% 4 / 332 Cypress Bioscience CYPB 4.06 -49% 55% 157 51 1.3x 67% 73% 1.7x n/m 0% 1 / -33 Cogo Group COGO 7.71 -27% 6% 272 211 1.4x 22% 73% .6x 8x 0% - / -34 Ascent Media ASCMA 27.64 -20% 11% 395 116 .7x 71% 73% .3x n/m 0% - / -35 TomoTherapy TOMO 3.46 -25% 28% 187 47 1.1x 75% 72% .2x n/m 7% 14 / 536 Hurco HURC 19.72 -30% 2% 127 82 1.2x 36% 71% .9x 26x 0% 3 / -37 * Force Protection FRPT 5.13 -25% 32% 360 255 1.1x 29% 70% .3x 14x 0% - / -38 PCTEL PCTI 6.09 -21% 17% 113 48 1.1x 58% 70% .7x 23x 4% 5 / 539 * Rimage RIMG 15.80 -12% 16% 151 50 1.2x 67% 70% .6x 20x 0% 4 / 240 Hooker Furniture HOFT 11.11 -17% 62% 120 90 1.0x 25% 70% .4x 11x 1% 5 / -41 Alvarion ALVR 2.72 -35% 57% 169 76 1.2x 55% 70% .4x - 0% - / -42 Aviat Networks AVNW 4.27 -21% 93% 253 160 1.1x 37% 69% .3x 14x 2% 8 / 643 * Kimball KBALB 5.92 -19% 62% 223 170 .6x 24% 69% .1x - 2% 9 / 144 * Tollgrade TLGD 8.30 -31% 0% 106 37 1.4x 66% 68% .8x - 1% 7 / -45 * Integrated Silicon ISSI 7.36 -45% 89% 193 106 1.1x 45% 68% .4x 6x 0% - / 1 Company website SEC Y! Price Charts Proxy Y!

* New additions are highlighted. Criteria: ► Tang. book > 50% of MV ► ST assets - liabilities > 50% of MV ► Net cash ► MV > $100mn

Favorite value screens included in each report

9 Exclusive interviews

“One of the things we really like

about Sears is they have a diverse

group of assets. They have brands....

They have a white goods home

service business...

They have land…and they have

capital resources...”

— Ken Shubin Stein, Founder,

Spencer Capital Management

“Medtronic fits my criteria perfectly.

It is a very high-quality company

that has grown earnings at about

14% a year over the last ten years.

It has a strong balance sheet [and]

a high return on capital, it trades at

nine to ten times earnings… It has a

very strong pipeline of products…”

— Vitaliy Katsenelson,

Chief Investment Officer,

Investment Management Associates

“The playing field for longer term

investing is getting less crowded.

Fewer people are able to think

about the long term and I believe

that creates an opportunity.”

— Tom Gayner, Chief Investment

Officer, Markel Corporation

“A checklist pulls us away from the

kinds of actions that we would take

if we were in either fight-or-flight or

greed modes.”

— Guy Spier, CEO,

Aquamarine Capital Management

“You have to find a style of investing

that fits with your personality. I’m

cheap and paranoid, so value investing

works well for me.”

— Paul Sonkin, Portfolio Manager,

The Hummingbird Value Funds

We frequently conduct interviews with

professional fund managers and present

these exclusively as part of our reports. This

exchange of ideas is aimed at developing and

honing the amorphous quality of investment

judgment. The Q&A therefore focuses on

the investment philosophy and thought

processes of the respective investment

manager.

• AaronEdelheit• AdamSteiner• AllanMecham• BrianBares• BrianGaines• CiccioAzzolini• DonFitzgerald• GuySpier• IgorLotsvin• KennethShubinStein• MaxOtte• MichaelvanBiema• OriEyal• PaulSonkin• ScottBarbee• ThomasGayner• TobyCarlisle• VitaliyKatsenelson• ZekeAshton• andmanymore…

10Monthly editorial commentary



Editorial Commentary Our task this month has seemed quite daunting at times: We set out to rummage

through the wreckage of the banking sector in search of investment opportunities for value-oriented investors. While doing so, we were mindful that many of the latter have viewed banks with suspicion, branding them as “black boxes” whose asset quality is impossible to ascertain. In a time of weak real estate prices and unusual strains on consumers, asset quality has become perhaps more important than ever.

While the “black box” critique of banks has merit, we did not simply want to dismiss the beaten-down sector and move on. After all, the following superinvestors have found apparent value in banks: David Tepper in Bank of America (BAC),Citigroup (C), Wells Fargo (WFC), Royal Bank of Scotland (RBS), Fifth Third Bancorp (FITB), and SunTrust Banks (STI); John Griffin and Steve Mandel in JPMorgan Chase (JPM); Glenn Greenberg in U.S. Bancorp (USB); Francis Chou in BAC; Eddie Lampert in Capital One (COF); Bruce Berkowitz in C and BAC; Phil Falcone and Bill Ackman in C; John Paulson in BAC, C, JPM, COF, and STI; Tom Brown in Synovus (SNV) and several other banks; Mason Hawkins in Bank of NY Mellon (BK); and Prem Watsa and Warren Buffett in WFC and USB. All of these positions are among the top ten largest holdings of each investor, suggesting meaningful commitments to the sector by these investment managers.

Our research effort has yielded five potential ways of approaching the banking sector in search of compelling investment ideas:

1. Too-big-to-fail “national champions” that remain historically cheap;

2. Strong institutions poised to benefit from the weakness of others;

3. Troubled banks with the most upside in a survival scenario, as gauged primarily by equity market value to total assets;

4. Banks that may outperform in an inflationary scenario due to relatively large long-term, fixed-rate liabilities; and

5. All-but-forgotten thrift conversions, with shareholder value yet to be unlocked in a second-step conversion.

The following is a snapshot of companies highlighted this month, along with classification by above category:

Top 5 Investment Ideas in This Report “National

Champion”“Strong Get Stronger”

Low MV to Assets

Inflation Beneficiary

Thrift Conversion

Barclays / BCSLondon, United Kingdom

Deutsche Bank / DBFrankfurt, Germany

Mitsubishi UFJ / MTUTokyo, Japan

Roma Financial / ROMARobbinsville, New Jersey

Waterstone Financial / WSBFWauwatosa, Wisconsin

Source: The Manual of Ideas.

Each report features a timely editorial

commentary, which pulls together key

observations and conclusions drawn from

our value-oriented research process.

The narrative highlights our top ideas,

providing additional clues as to why a

particular stock may be attractive in the

context of all the other opportunities our

research team has analyzed or that

may be available in the wider market.

A key differentiator of our editorials is the

“buy side” mindset we bring to the idea

generation process. Rather than evaluating

investments within narrow industry or size

classifications, we cut across sectors, market

capitalization ranges and geographies to

present you with the most compelling ideas

based on value versus price.

Clear, incisive, and often provocative analysis

The Manual of Ideas’ monthly top ideas from inception in November 2008 through May 2010Stock Price Stock Total Return S&P 500 Total Return

Featured On Featured From Featured Date To From Featured Date To

Company Ticker Date 1 Date 1 Year Later 2 1 Year Later 3

American Eagle Outfitters NYSE: AEO 11/27/2008 $9.88 57% 26%Garmin Nasdaq: GRMN 11/27/2008 $17.02 87% 26%KHD Humboldt Wedag (delisted on 3/31/10) NYSE: KHD 11/27/2008 $9.10 50% 26%MEMC Electronic Materials NYSE: WFR 11/27/2008 $15.50 -22% 26%Microsoft Nasdaq: MSFT 11/27/2008 $20.49 45% 26%Net 1 UEPS Technologies Nasdaq: UEPS 11/27/2008 $10.15 84% 26%Premier Exhibitions Nasdaq: PRXI 11/27/2008 $0.69 68% 26%Syneron Medical Nasdaq: ELOS 11/27/2008 $6.77 48% 26%Tempur-Pedic International NYSE: TPX 11/27/2008 $6.95 209% 26%Travelzoo Nasdaq: TZOO 11/27/2008 $6.54 117% 26%American Express NYSE: AXP 2/20/2009 $12.97 207% 48%AmeriCredit (acquired on 10/1/2010) NYSE: ACF 2/20/2009 $3.88 475% 48%EchoStar Nasdaq: SATS 2/20/2009 $16.01 22% 48%Greenlight Capital Re Nasdaq: GLRE 2/20/2009 $13.12 88% 48%Microsoft Nasdaq: MSFT 2/20/2009 $18.00 63% 48%Premier Exhibitions Nasdaq: PRXI 2/20/2009 $0.90 48% 48%Sears Holdings Nasdaq: SHLD 2/20/2009 $38.03 150% 48%Fibrek (formerly SFK Pulp Fund) Toronto: FBK 2/20/2009 C$0.41 220% 48%Sony Tokyo: 6758 2/20/2009 ¥1,588 96% 48%Travelzoo Nasdaq: TZOO 2/20/2009 $4.97 127% 48%Actions Semiconductor Nasdaq: ACTS 4/27/2009 $1.73 37% 41%Ascent Media Nasdaq: ASCMA 4/27/2009 $24.60 20% 41%Comverse Technology OTC: CMVT 4/27/2009 $6.99 29% 41%Harvest Natural Resources NYSE: HNR 4/27/2009 $4.43 95% 41%K-Swiss Nasdaq: KSWS 4/27/2009 $9.58 40% 41%EchoStar Nasdaq: SATS 5/28/2009 $15.73 34% 22%EMC NYSE: EMC 5/28/2009 $11.76 58% 22%Republic Airways Nasdaq: RJET 5/28/2009 $5.78 1% 22%Ticketmaster (acquired on 1/25/2010) Nasdaq: TKTM 5/28/2009 $7.30 112% 23%WellCare Health Plans NYSE: WCG 5/28/2009 $19.24 42% 22%Apartment Investment & Management NYSE: AIV 6/19/2009 $9.09 149% 24%MI Developments Toronto: MIM.A 6/19/2009 C$9.12 53% 24%Playboy Enterprises (acquired on 3/4/2011) NYSE: PLA 6/19/2009 $2.73 38% 24%Steinway Musical Instruments NYSE: LVB 6/19/2009 $10.97 67% 24%Syms Nasdaq: SYMS 6/19/2009 $6.90 9% 24%McGraw-Hill Companies NYSE: MHP 7/31/2009 $31.35 1% 13%Princeton Review Nasdaq: REVU 7/31/2009 $5.42 -54% 13%Sotheby’s NYSE: BID 7/31/2009 $15.07 81% 13%Contango Oil & Gas NYSE: MCF 8/21/2009 $46.31 -7% 6%Exterran Holdings NYSE: EXH 8/21/2009 $17.84 20% 6%Pfizer NYSE: PFE 8/21/2009 $16.64 -0% 6%GigaMedia Nasdaq: GIGM 9/29/2009 $5.31 -61% 10%Pervasive Software Nasdaq: PVSW 9/29/2009 $5.15 -5% 10%Raytheon NYSE: RTN 9/29/2009 $48.30 -3% 10%AstraZeneca London: AZN 10/27/2009 £28.30 20% 13%Diageo London: DGE 10/27/2009 £9.59 24% 13%InterContinental Hotels London: IHG 10/27/2009 £7.86 57% 13%OMV Vienna: OMV 10/27/2009 €29.03 -4% 13%

Performance ReviewIn this section, we review the performance of ideas featured as “top ideas” in past issues of The Manual of Ideas.

Since inception in November 2008, the Manual of Ideas’ top ideas have delivered an average total return of +45% versus

+23% for the S&P 500 Index ETF, based on a one-year holding period after each publication date. *

The Manual of Ideas’ monthly top ideas from inception in November 2008 through May 2010Stock Price Stock Total Return S&P 500 Total Return

Featured On Featured From Featured Date To From Featured Date To

Company Ticker Date 1 Date 1 Year Later 2 1 Year Later 3

Royal Wessanen Amsterdam: WES 10/27/2009 €4.14 -35% 13%ADP Nasdaq: ADP 11/20/2009 $43.45 8% 12%ATP Oil & Gas Nasdaq: ATPG 11/20/2009 $15.93 -7% 12%CapitalSource NYSE: CSE 11/20/2009 $3.78 76% 12%Lockheed Martin NYSE: LMT 11/20/2009 $76.10 -5% 12%MVC Capital NYSE: MVC 11/20/2009 $9.96 37% 12%Contango Oil & Gas Amex: MCF 12/31/2009 $47.01 23% 15%Imation NYSE: IMN 12/31/2009 $8.72 18% 15%Lodgian (acquired on 4/19/2010) Amex: LGN 12/31/2009 $1.40 79% 8%Stewart Information Services NYSE: STC 12/31/2009 $11.28 3% 15%VASCO Data Security Nasdaq: VDSI 12/31/2009 $6.28 29% 15%BreitBurn Energy Partners Nasdaq: BBEP 1/21/2010 $13.36 72% 17%Contango Oil & Gas Amex: MCF 1/21/2010 $52.23 11% 17%EchoStar Nasdaq: SATS 1/21/2010 $19.32 39% 17%Gravity Nasdaq: GRVY 1/21/2010 $1.72 20% 17%Lockheed Martin NYSE: LMT 1/21/2010 $76.98 6% 17%Premier Exhibitions Nasdaq: PRXI 1/21/2010 $1.35 18% 17%Seaspan NYSE: SSW 1/21/2010 $10.74 34% 17%Stewart Information Services NYSE: STC 1/21/2010 $10.97 7% 17%Syms Nasdaq: SYMS 1/21/2010 $8.15 -16% 17%Take-Two Interactive Nasdaq: TTWO 1/21/2010 $9.37 30% 17%Fair Isaac NYSE: FICO 2/18/2010 $22.41 27% 23%Hyatt Hotels NYSE: H 2/18/2010 $30.00 55% 23%Investors Title Company Nasdaq: ITIC 2/18/2010 $35.40 -8% 23%Republic Airways Nasdaq: RJET 2/18/2010 $5.53 20% 23%Vodafone London: VOD 2/18/2010 £1.42 34% 23%Nokia Helsinki: NOK1V 3/25/2010 €11.53 -48% 15%Playboy Enterprises (acquired on 3/4/2011) NYSE: PLA 3/25/2010 $3.72 65% 15%Sony Tokyo: 6758 3/25/2010 ¥3,470 -23% 15%Time Warner NYSE: TWX 3/25/2010 $31.23 16% 15%Toyota Motor Tokyo: 7203 3/25/2010 ¥3,705 -10% 15%Gravity Nasdaq: GRVY 4/21/2010 $2.16 -17% 13%I.D. Systems Nasdaq: IDSY 4/21/2010 $3.07 52% 13%LookSmart Nasdaq: LOOK 4/21/2010 $1.15 64% 13%Market Leader Nasdaq: LEDR 4/21/2010 $2.16 9% 13%Maxygen Nasdaq: MAXY 4/21/2010 $7.05 13% 13%Baxter International 4 NYSE: BAX 5/24/2010 $41.82 45% 28%CapitalSource 4 NYSE: CSE 5/24/2010 $4.36 42% 28%DirecTV 4 NYSE: DTV 5/24/2010 $36.78 38% 28%Sealed Air 4 NYSE: SEE 5/24/2010 $20.58 29% 28%Take-Two Interactive 4 Nasdaq: TTWO 5/24/2010 $10.82 48% 28%

Average Performance Since Inception (1-Year Holding Period) 5 45% 23%

1 Based on the publishing date of The Manual of Ideas report which features the company as a “top idea.” Please note that prior to April 2009, The Manual of Ideas publishing schedule was quarterly (starting with the inaugural report in November 2008).

2 Total return includes share price performance and dividends, if any, for the respective one year holding period. Share price performance is calculated based on closing share prices as of the respective featured date and the related one year anniversary date (except for share prices for Playboy, Lodgian and Ticketmaster, which are based on their respective acquisition prices; the related S&P 500 prices are as of the date the respective acquisition was completed).

3 S&P 500 figures are based on the investable SPDR S&P 500 (NYSE: SPY). The figures relating to the respective returns for Playboy, Lodgian, and Ticketmaster reflect different holding periods (see related discussion in footnote #2).

4 The stock total return and related S&P 500 total return figures are based on closing prices as of May 12, 2011.5 The performance figures exclude top ideas since June 2010 as their one year performance data is not available as of the publishing date.

* Disclaimer: Nothing in this brochure should be construed as an investment recommendation. Past performance is no guarantee of future performance. Please visit www.manualofideas.com/terms.html for all terms governing your use of The Manual of Ideas content.

- continued

www.manualofideas.com/terms.html

John Mihaljevic, CFA, is a Managing Editor at The

Manual of Ideas and has also served as principal of

investment firm Mihaljevic Capital Management since

2005. He is a member of Value Investors Club, an

exclusive community of top money managers, and has

won the Club’s prize for best investment idea. John is a

trained capital allocator, having studied under Yale chief

investment officer David Swensen and served as research

assistant to Nobel laureate James Tobin. John holds a BA

in Economics, summa cum laude, from Yale and is a CFA

charterholder. He resides in Zurich, Switzerland.

Oliver Mihaljevic is a Managing Editor at The Manual

of Ideas. Prior to joining the company in 2009, Oliver has

worked as an investment analyst for U.S.-based hedge fund

Steel Partners since 2005. Previous roles included portfolio

manager at a Germany-based private equity investment

firm as well as equity research analyst for Credit Suisse

First Boston in New York. Oliver holds a BA in Economics

from Yale. He resides in London, United Kingdom.

IDEAS-DRIVEN – delivers 20+ equity investment ideas to you every month

VALUE-ORIENTED – guided by principles of Graham, Buffett, Klarman

INDEPENDENT – not tainted by investment banking relationships

“BUY-SIDE” FOCUSED – highlights key investment drivers and risks, not noise

WRITTEN BY TRAINED INVESTMENT PROFESSIONALS – not journalists

BASED ON PRIMARY SOURCES – relies on regulatory filings, not databases

AGNOSTIC ON SIZE, SECTOR, GEOGRAPHY – filters stocks by risk-reward

“John - and the team at

Manual of Ideas - are really

extraordinary. Amazing

product/service.”

— Shai Dardashti, Managing

Partner, Dardashti Capital

Management

For more information and to subscribe, visit manualofideas.com

THE MANUAL OF IDEAS TEAM

Our research team has extensive experience in equity analysis and investment

management. The team is led by brothers John and Oliver Mihaljevic, who are both

Yale graduates and have studied under Yale Endowment chief investment officer

David Swensen. They each have more than ten years of direct investing experience.

While the research team includes contributors from around the world, John and

Oliver are directly involved in idea generation, analysis and writing for each report.

THE MANUAL OF IDEAS

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